Domestic Parts Push Slows Taiwan's Vehicle Output, but MOEA Sees Recovery

The Ministry of Economic Affairs (MOEA)'s Nationalization of Domestic Vehicle Parts policy has unexpectedly led to a reduction in automobile and parts production, though the MOEA expects this impact to be short-term.

The MOEA's Department of Statistics released the Industrial Production Index on September 23, noting a 15.28% annual decrease in the automobile and parts industry. This marks five consecutive months of negative growth, with a widening year-over-year decline. Deputy Director of the Department of Statistics, Huang Wei-Chieh, explained that this decrease is primarily due to shortages in parts for certain models, production adjustments for model modifications, and reduced orders from clients undergoing inventory adjustments.

Huang further elaborated that domestic car registrations have fallen this year, largely due to competition from imported cars. Domestic electric vehicle performance, initially strong, also weakened in September, partly because the Nationalization of Domestic Vehicle Parts policy has caused shortages of some parts or delays in verifying domestic alternatives. Meanwhile, production of automotive components remains uneven due to differing inventory management strategies among European and American manufacturers. Huang believes the current parts shortage is temporary and expects production to recover as the domestic auto parts supply chain matures. In September, new vehicle registrations fell by 1.5%, with a 7.6% increase for imported vehicles but a 9.8% drop for domestically manufactured vehicles—highlighting a significant competitive impact on the domestic sector.

The MOEA announced in August that any Chinese models assembled and sold in Taiwan must meet a set localization percentage from the outset: 15% in the first year of market entry, 25% in the second, and 35% in the third. The policy requires an annual increase in the use of local supply chains, and the stipulated ratios are retroactive. This mandate has required parts replacements and production line adjustments, resulting in a temporary decrease in overall vehicle production.