Sky's the Limit for Luxgen Car Investment: Yulon CEO Kenneth Yen

After spending years of effort and piles of money, the Yulon Group, Taiwan's largest carmaker, recently presented its LUXGEN own-brand car development project to the world. A lot of work remains to be done, noted Yulon CEO Kenneth Yen, who said that his company has NT$25 billion (US$757.58 million at NT$33:US$1) cash on hand to develop and promote four new models in Taiwan and mainland China over the next few years. At the same time, he insisted that there is no ceiling on the amount of money he is prepared to invest in the project.

During the press conference that Yulon held to present the LUXGEN brand, Yen told the assembled reporters that the global financial turmoil will not last and that no company can stand by and do nothing when it is confronted with unfavorable market changes. The second-generation entrepreneur (Yulon was founded by his father) said that he believes the overall automobile market will begin a gradual recovery late in the first quarter of this year.

"The unfavorable overall business climate, contrary to most people's thinking, improves the chances for own-brand development in the automotive industry because the cost of most materials will fall," Yen said optimistically. "In addition, the serious impact (of the recession) on the global automotive industry, in fact, offers a great chance for Yulon to recruit more talented R&D experts, because the original big players in the market have become less strong than before. All signs point to a positive future for well-prepared newcomers."

Yulon is fully prepared to develop its LUXGEN own-brand business, Yen said, with more than NT$10 billion (US$303 million) cash on hand and valuable land assets, mainly its old plant in the southern part of Taipei. The LUXGEN project has already absorbed NT$7 billion to NT$8 billion (US$212 million to US$242 million), the CEO noted.

When asked about the project's investment ceiling, Yen reversed his former position (that "a stop-loss point has been established, one which will not shake the solid foundation of our group") and insisted that nothing could stop the LUXGEN project.

Every Model Profitable

Cheng Kuo-rong, vice chairman of the Luxgen Motor Co. and president of the Yulon Motor Co., stated confidently that "each LUXGEN car model has to be profitable and win at least a 10% share of the market in its class." He added that the new company aims to turn a profit in two to three years.

At the press conference, Yen also disclosed-for the first time in public-his thinking about the development of the own-brand car business. The development of a homegrown own-brand car was the long-term aspiration of parents, founders of the Yulon Group, and it has become Yen's own commitment. "Faced with the overall environment in Taiwan," he explained, "Yulon has to pursue change as ardently as possible and own-branding is the only way to go. That's my inescapable responsibility."

Yen reiterated his determination to succeed with LUXGEN, and expressed the belief that Taiwan's first successful homegrown auto brand would become another pride and joy for the island, like such past successes as Acer (personal computers), HTC (smartphones), and Giant (bicycles).

Yen's Role

Yen resolved to follow his parents' dream and develop LUXGEN. He realizes what a difficult task this is, but is given confidence by his success in reviving the fortunes of Yulon Motor 13 or 14 years ago.

He took the helm of the company around 15 years ago, at a time when Yulon was suffering a serious sales decline due to poor quality and a lack of competitive products. Yen turned its corporate fortunes around by introducing and promoting the Nissan Cefiro medium sedan, which was locally assembled under the most stringent quality requirements. The Cefiro took the No. 1 sales position in its class and held it for over five years, restoring the image of the Nissan brand in Taiwan.

Yen is now repeating that experience of 15 years ago, when he stayed at the factory almost 24 hours a day, seven days a week, to oversee every detail of the Cefiro operation. Now, however, the focus of his efforts is LUXGEN.

Luxury and Genius

The company explains that LUXGEN is the combined contraction of two words: luxury and genius, implying the pursuit of intelligence and high technology in motoring. The brand name and its capitalized "L" trademark have been registered in Taiwan and mainland China, reflecting Yulon's initial strategy of tapping those two markets.

The first LUXGEN is expected to be a multi-purpose van (MPV) powered by a 2,200cc homegrown gasoline engine. Yulon also plans to introduce a sport utility vehicle (SUV) and a sub-compact sedan in the fourth quarter of 2009 and the middle of 2010, respectively.

A Yulon subsidiary, the Hua-chuang Automobile Information Technical Center Co. (HAITEC), has been working on the development of a pure-electric car (on the MPV chassis) for several years. HAITEC has tied up with several local and foreign partners, including E-ton Powertec Co., High Tech Computer Corp. (HTC), and AC Propulsion, in the joint development of the prototype which, according to Luxgen president K.C. Hu (formerly the president of Jaguar Taiwan), is expected to be commercialized in around two years.

Luxgen File
Location	Taiwan	China
Company Name	Luxgen Motor Co.	Luxgen (Hangzhou) Motor Co.
Capitalization	NT$2 billion	4.65 billion RMB.
Major Shareholders	Yulon Group (100%)	Yulon (50%), China-based Zhoungyu Group (50%)
Manufacturer	Yulon Motor	Luxgen Hangzhou
Target Market	Taiwan, overseas	China
Products	MPV, SUV, compact sedan, electric MPV
Commercialization	Q2'09	Mid-2010
Source: Luxgen