Taiwan Moves to Boost Complete-car Development

The Ministry of Economic Affairs (MOEA) recently mapped out a technology development project that calls for the integration of Taiwan's resources in the development of 100% home-grown automobiles. Further down the line, the government wants carmaking to join semiconductor and thin film transistor-liquid crystal display (TFT-LCD) panel production as one of the island's “trillion NT dollar” industries.

The project's main goal, according to a senior consultant to the MOEA's Department of Industrial Technology (DoIT), is to develop a complete car that is 100% designed and developed in Taiwan. All key parts and subsystems are to be made by local manufacturers, and assembly is also to take place here.

Among major local automakers, the most enthusiastic about the project are the Yulon Motor Co. and Formosa Automobile Corp. Yulon has been striving to build up its own car design and development capability for more than 20 years, and has set up an auto development enterprise, the Hua-chuang Automobile Information Technical Center Co., in cooperation with local information and communication technology (ICT) manufacturers.

Formosa has been working on the development of hybrid vehicles for years.

Chang Yuan-chang, senior consultant to DoIT, reports that the government will subsidize the car-development project through the budget of the MOEA's Science and Technology Development Project. Usually, such subsidies are limited to 10% to 20% of total project cost; for the car project, however, the amount is expected to be 40%.

Some local automakers say that the cost of developing and producing a made-in-Taiwan car will be at least NT$10 billion (US$312.5 million at NT$32:US$1).

New Trillion Dollar Industry

The total production value of Taiwan's automotive industry topped NT$600 billion (US$18.75 billion) in 2005 and is expected to surpass NT$1 trillion (US$31.25 million) within a few years, thanks to the new development project and the rapid growth of the island's automotive-electronics industry.

Chang notes that Taiwan's automotive industry environment is much more mature now than it was when Yulon undertook the island's first complete-auto development project (resulting in the “Feeling 101” model) about 20 years ago. As an example of this maturity, he cites the fact that many hot-selling foreign models are now redesigned, modified, and manufactured right here.

Also, Chang adds, Taiwan's industrial design and innovation skills have made strong progress in the past few years, thanks to efforts by both the government and the private sector to cultivate manpower by organizing international design contests and increasing the number of design courses at major universities, among other means.

“Taiwan has never had such a great opportunity to develop a homegrown automobile,” states Huang Long-chou, president of Taiwan's Automotive Research & Testing Center (ARTC). “The design and development capabilities here, along with our manufacturing technology, have been greatly upgraded; and the division-of-labor strategies of the big international automakers, especially those in Europe and the United States, are also generating greater opportunities.”

Yulon's homegrown car, the Feeling, failed because of the limited local market, a strong dependence on technology from foreign partners, and an immature auto-parts supply chain. Now, boosters believe, things have changed for the better.

One of the most important changes is the establishment of the IA (IT and Automobile) Project, jointly initiated by the Yulon Group (the island's largest automaking conglomerate) and the MOEA. The goal of the project is to develop comprehensive technology platforms for complete automobiles and automotive electronics,

Yulon has invited a number of local world-class ICT manufacturers to join the project, including Hon Hai (the world's largest maker of barebone PCs, connectors, and game consoles), the Kinpo-Compal Group (a leading producer of ICT hardware), Quanta Computer (a leading contract producer of notebook PCs), and Asustek Computer (the world's largest maker of motherboards and a major contract manufacturer of notebook PCs). The response from the companies has been positive.

Learning from Foreign Partners

Huang notes that all of the island's automakers cooperate with foreign technical partners; and that with their intensive cultivation of design and development capabilities, as well as the know-how and experience that they have accumulated over the years, some of them now play an increasingly important role in redesigning and manufacturing models that meet Asian tastes.

“Part of the importance of a local design and development capability is that such a capability is a key indicator of a country's auto industry development. We've experienced failure (with the Feeling); but now conditions throughout the world and in Taiwan have changed drastically, and this brings us unlimited opportunities.”

Over the past 20 years, Huang stresses, Taiwan has made great strides in mold and die development, the island's ICT industry has established a strongly competitive position in the global market (this is important, because modern cars incorporate a growing number of electronic parts and components), some local companies are now mass producing auto engines, and the ARTC has begun providing a comprehensive range of complete-auto and auto-parts certification services that meet international standards. Together with the development of related industries, these advancements have made Taiwan an ideal base for the development and manufacturing of complete automobiles, Huang says.

“Along with the era of globalization and global sourcing,” he explains, “has come an international division-of-labor strategy in which Taiwan's automakers and parts suppliers are expected to play an increasingly important role.”

Also favoring the development of a complete-auto design and manufacturing capability in Taiwan is the rapid increase in auto sales in mainland China. Since Taiwan has one of Asia's most industrially advanced and mature auto markets, the president adds, local car manufacturers have a feel for the tastes of new-car buyers there and through the region. This is why they are able to redesign new models of foreign brands for sale in the markets of Asia.