Competition Intensifies Among Taiwan's ATV Makers
Sep 26, 2005 Ι Industry In-Focus
Ι Auto Parts and Accessories Ι By Quincy, CENS
According to the reports, the Sanyang Industry Co. (SYM), one of Taiwan's top three makers of powered two-wheelers (PTWs), has won an order for all-terrain vehicles (ATVs) from Bombardier of Canada. The reports also say that SYM has promised to cut its costs by 35% over the next three years.
Sanyang refused to confirm the reports, and stressed that it is concentrating on selling its SYM-brand ATVs in Europe. However, some industry insiders say, if the reports prove true then at least five of Taiwan's ATV makers will face a challenge to their survival.
The industry sources went on to say that first-class PTW makers in Taiwan were not very interested in the ATV business in the past, but that a continuous fall in profit margins on their PTW products forced them into the line. For instance, the Kwang Yang Motor Co. (KYMCO) expanded into the development of ATV products three years ago and has introduced commercialized models over the past two years. Sanyang brought out its first ATV in March this year.
The entry of these big newcomers into the ATV market has heated up the competition and driven margins down to 20%, just half the level of a few years ago. For some small-displacement models, the margins have even dropped to under 15%. This has had a serious impact on the survival of some of the island's relatively small manufacturers.
The big newcomers from the PTW industry, insiders say, are able to gain a fast foothold because of their advantageous parts-procurement position (since ATVs use many of the same parts as PTWs) and strong R&D capability.
KYMCO, for example, quickly replaced the Her Chee Industrial Co. as Taiwan's largest ATV exporter the year after it entered the business, and aims to ship 50,000 ATVs this year. To further strengthen the competitiveness of its exports, KYMCO plans to slash the unit prices of its ATVs by 200-300 euros this year.
SYM also enjoys cost advantages, and reportedly sells its ATVs for around 5% less than other local manufacturers' vehicles of the same class.
Suffering Taiwanese Manufacturers
Both KYMCO and SYM say that their low-price marketing strategy is a response to cutthroat competition from rivals in mainland China, and is not designed to force smaller Taiwanese suppliers out of the market. However, industry sources say, the greatest impact of this strategy (in the form of shrinking profits) is being felt by other Taiwanese ATV makers.
For example, Her Chee, once the island's No. 1 maker of ATVs, is (like 20-odd other Taiwanese ATV manufacturers), facing fierce competition from local rivals that has pushed its profit margin down to 20.82% in the first half of this year, 8.46% less than the same period of 2004.
The company says that in response to the competition for the newcomers, it has asked its upstream parts suppliers to cut their process and has begun developing larger ATV engines as well as platforms for more new ATV models. It also plans to build a new R&D center at its plant in the southern Taiwan city of Tainan.
Her Chee wants to introduce at least three new models this year, and a 500cc model in 2006 that will use an engine developed by the company itself. These efforts will help the Her Chee to offer a more comprehensive ATV line and to diversify into the mini-car sector.
Company vice president and spokesman Wang Chao-chin insisted that the company is financially healthy and has held on to its customer base. It currently supplies ATVs to Bombardier, a major South Korean customer, and several clients in Europe.
Some local ATV manufacturers fear that their big new rivals might use low-price parts from mainland China or Southeast Asia in order to keep their costs down. The big newcomers retort that they have never done such a thing, especially in view of the fact that safety requirements are more stringent for ATVs than for PTWs in general.
Global ATV Demand
Sanyang refused to confirm the reports, and stressed that it is concentrating on selling its SYM-brand ATVs in Europe. However, some industry insiders say, if the reports prove true then at least five of Taiwan's ATV makers will face a challenge to their survival.
The industry sources went on to say that first-class PTW makers in Taiwan were not very interested in the ATV business in the past, but that a continuous fall in profit margins on their PTW products forced them into the line. For instance, the Kwang Yang Motor Co. (KYMCO) expanded into the development of ATV products three years ago and has introduced commercialized models over the past two years. Sanyang brought out its first ATV in March this year.
The entry of these big newcomers into the ATV market has heated up the competition and driven margins down to 20%, just half the level of a few years ago. For some small-displacement models, the margins have even dropped to under 15%. This has had a serious impact on the survival of some of the island's relatively small manufacturers.
The big newcomers from the PTW industry, insiders say, are able to gain a fast foothold because of their advantageous parts-procurement position (since ATVs use many of the same parts as PTWs) and strong R&D capability.
KYMCO, for example, quickly replaced the Her Chee Industrial Co. as Taiwan's largest ATV exporter the year after it entered the business, and aims to ship 50,000 ATVs this year. To further strengthen the competitiveness of its exports, KYMCO plans to slash the unit prices of its ATVs by 200-300 euros this year.
SYM also enjoys cost advantages, and reportedly sells its ATVs for around 5% less than other local manufacturers' vehicles of the same class.
Suffering Taiwanese Manufacturers
Both KYMCO and SYM say that their low-price marketing strategy is a response to cutthroat competition from rivals in mainland China, and is not designed to force smaller Taiwanese suppliers out of the market. However, industry sources say, the greatest impact of this strategy (in the form of shrinking profits) is being felt by other Taiwanese ATV makers.
For example, Her Chee, once the island's No. 1 maker of ATVs, is (like 20-odd other Taiwanese ATV manufacturers), facing fierce competition from local rivals that has pushed its profit margin down to 20.82% in the first half of this year, 8.46% less than the same period of 2004.
The company says that in response to the competition for the newcomers, it has asked its upstream parts suppliers to cut their process and has begun developing larger ATV engines as well as platforms for more new ATV models. It also plans to build a new R&D center at its plant in the southern Taiwan city of Tainan.
Her Chee wants to introduce at least three new models this year, and a 500cc model in 2006 that will use an engine developed by the company itself. These efforts will help the Her Chee to offer a more comprehensive ATV line and to diversify into the mini-car sector.
Company vice president and spokesman Wang Chao-chin insisted that the company is financially healthy and has held on to its customer base. It currently supplies ATVs to Bombardier, a major South Korean customer, and several clients in Europe.
Some local ATV manufacturers fear that their big new rivals might use low-price parts from mainland China or Southeast Asia in order to keep their costs down. The big newcomers retort that they have never done such a thing, especially in view of the fact that safety requirements are more stringent for ATVs than for PTWs in general.
Global ATV Demand
| Year | Volume |
| 2003 | 0.97 million |
| 2004 | 1.1 million |
| 2005 | 1.1 million* |
*Forecast
Source: Industrial Technology Information Service & Promotion (IT
IS) Project, Ministry of Economic Affairs
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