Honda Motor Co. of Japan is evaluating whether to set up an automobile R&D center in Taiwan, according to the Ministry of Economic Affairs (MOEA). Honda's project would be a prize catch in the MOEA's efforts to make the island a key auto-parts supply base in the Asia-Pacific region; the ministry has been aggressively seeking to get foreign automakers to set up research units on the island.

If everything goes smoothly, MOEA officials say, Honda's R&D center will be the first such R&D facility 100%-invested by a foreign automaker. Honda Japan terminated its auto-production technical-cooperation ties with Taiwan's Sanyang Industry Co. in early 2003, and immediately set up a 100%-owned subsidiary in Taiwan, the Honda Taiwan Motor Co. Sanyang now locally produces car models from Hyundai Motor of South Korea.



Honda Taiwan bought and upgraded an auto plant from Ta Ching Motor Co., former local maker of Subaru cars. It is currently producing two models at the facility, the C-RV sport utility vehicle (SUV) and Accord medium-size sedan.

MOEA officials point out that all of the top four automakers in Taiwan--Kuozui Motors (in partnership with Toyota of Japan), Ford Lio Ho Motor (Ford of the U.S.), Yulon Motor (Nissan of Japan) and China Motor (Mitsubishi Motors of Japan)--have set up technical R&D centers on the island and are playing a vital role in their foreign partners' global division-of-labor schemes, redesigning car models to better suit them to regional consumers' tastes.

If Honda decides to go ahead with its R&D center, MOEA officials say, the centers in Taiwan set up by the top four Japanese car brands, Toyota, Nissan, Mitsubishi, and Honda, will have brought in a total investment of approximately NT$37 billion (US$1.1 billion at US$1: NT$33.7) and be key in Taiwan's buildup of its own capabilities in such areas as complete-car styling, version-change projects, manufacturing-technique upgrading, and auto-parts logistics systems.

In addition to further strengthening the island's automobile design and development, MOEA officials say, the Japanese-invested R&D centers are also expected to help Taiwan become an auto-parts supply base, in support of the production of Taiwan-redesigned car models in the Japanese automakers' overseas plants throughout the Asia-Pacific region.

After 20-plus years of development, industry analysts say, Taiwan's auto-parts industry is one of the leading traditional sectors, and many local parts makers are now enjoying success in both the international aftermarket (AM) and original equipment (OE) parts markets. New Minister for Economic Affairs Ho Mei-yue and her MOEA team have mapped out a multi-point plan for development of the local auto-parts industry, urging several large domestic trading companies to set up overseas branches in major automobile-production nations to serve as sourcing platforms for high-quality, Taiwan-made auto parts.

Such efforts, say analysts, show the government's strong intention to upgrade the island's role in the division-of-labor now being implemented in the international automobile industry, making it into a global OE-parts supply base and a contract car-production center for big international auto brands (with the supply of Taiwan-made parts).

Lin Hsin-yi, former Vice Premier and ex-chairman of China Motor, also recently announced that he planned to set up a venture-capital firm that will seek to build an auto-production platform for international auto brands by integrating the island's abundant resources in semiconductors, electronics, electrical machinery, and other related lines.

Honda is a major focus of the government's investment-solicitation initiative, MOEA officials say, as the Japanese automaker's R&D center is expected to bring more local parts suppliers into Honda's global supply chain and bolster parts exports from Taiwan.