Major Milestones Set in Taiwan's Automotive Landscape in 2009

New car sales in 4Q rise due

Likely driven partly by fairly steady global economic recovery, Taiwan's automotive production value has been revived somewhat, with the island's new-car sales rising in the fourth quarter of 2009, without however assuring the long-term prospects of the sector especially when the official incentive program, a tax break on sub-2,000cc cars, has expired at the end of 2009.

Taiwan's automotive production value, including assembled vehicles and auto parts, increased by 15% quarter-on-quarter (QoQ) and 49.1% year-on-year (YoY) in the fourth quarter of 2009, to an estimated NT$75.83 billion (US$2.33 billion), compared to NT$64.96 billion or US$1.99 billion in the third quarter, according to the government-backed Industry & Technology Intelligence Services of the Industrial Economics & Knowledge Center (IEK-ITIS).

Taiwan's automotive production value would likely reach NT$249 billion (US$7.66 billion) in 2009, including NT$110.3 billion (US$3.39 billion) from assembled vehicles (up 13.8% YoY) and NT$138.68 billion (US$4.27 billion) from parts and components (down 8.9% YoY).

The IEK-ITIS attributes the rise in vehicular production value to the official tax break given to new cars sold, which became effective in January 2009.

Q4 Production

The production value of assembled vehicles totaled NT$35.24 billion (US$1.08 billion) in the fourth quarter, up 18.1% QoQ from NT$29.69 billion or totaling US$913.5 million in the third quarter. Production values of passenger/commercial vehicles and mid/compact cars saw the highest YoY increases during the period, at 29.1% and 10.1%, respectively.

Some 45,000 new cars were licensed in December, as the tax break incentive was to expire by the end of that month; and new-car sales in Taiwan for 2009 totaled 294,000 units, a 28.3% YoY increase.

The auto-parts sector contributed NT$40.59 billion (US$1.25 billion) to the automotive production value in the fourth quarter, up 12.5% QoQ from NT$35.27 billion or totaling US$1.09 billion in the third quarter.

Production values of bus bodies/frames and transmission system parts saw the highest QoQ increases, 47.3% and 30.9%, respectively, with that of auto gauges, steering parts, and other parts recording the highest YoY growths, 46.7%, 35.1%, and 33.5%, respectively.

Exports of Taiwan-made auto parts rose gradually in the second half of 2009 in response to continually recovering global economy.

Major Events

In the fourth quarter the Yulon Group, Taiwan's largest carmaker, signed a cooperative letter of intent (LOI) with Geely Automobile Holdings Ltd. of China, with the two parties aiming to partner in R&D, production, sales and services, parts supply and labor sharing.

Yulon also unveiled its second own-brand "tobe" and launched its first "tobe" model—the M'car built on a Geely-developed platform—at a press conference to announce the establishment of the new Yulon Tobe Motor Co. subsidiary. Tobe-badged cars are positioned to differentiate from the LUXGEN line, Yulon's upscale brand of larger, higher-performance and luxurious vehicles.

More than five years in the making, Yulon in September 2009 introduced its first LUXGEN—the LUXGEN7 multi-purpose van (MPV), with one model powered by a 2,200cc turbocharged gasoline engine and the other by batteries.

Still unavailable in Taiwan, Yulon says the M'car is sold in Vietnam through local agent Kylin Group, and exports to the Philippines are under negotiation.

Ambitious Goal

Yulon also announced its ambitious goal to set up a world-class EV team by allying all the major suppliers of key EV parts on the island, including the E-One Moli Energy Corp. (lithium-ion batteries), Fukuta Elec. & Mach. Co. (motors), and Chroma ATE Inc. (power management). The carmaker has already built a battery electric vehicle (BEV)—the M'car—for Geely and mainly for the huge China market.

Industry sources say that the tobe M'car is the first product built by a formal Taiwan-China car-making partnership, with the Yulon-Geely tie-up serving as a model for others on both sides of the Taiwan Strait. With such division-of-labor, they explain, Yulon can adopt more China-built platforms to quickly introduce new models, with the Taiwanese automaker also upgrading vehicle-structure, performance and detailing for improved marketability.

The sources say that Taiwan's car market is too small for local automakers' homegrown model developments. The Yulon-Geely partnership model enables increasingly more China-made cars to be built in Taiwan, which can also become a product-differentiation and export base for ever more Chinese automakers. Such development can also help further strengthen the local auto-parts industry by cultivating increasingly more suppliers with world-class capacities.

Cross-strait Auto Conference

To foster closer cooperation between Cross-strait auto sectors, Taiwan's Ministry of Economic Affairs (MOEA) commissioned the Taiwan Transportation Vehicle Manufacturers' Association (TTVMA) and the Taiwan Automotive Research Consortium (TARC) to organize the Conference on Cross-strait Cooperation and Exchange in the Automobile (including Battery Energy Storage) Industry, held November 23 to 25, 2009.

Over 500 senior executives from major automotive enterprises in Taiwan and China discussed cooperation opportunities after the signing of the Economic Cooperation Framework Agreement (ECFA) between Taiwan and China. Major automotive-electronic companies and automotive research institutes, including the Industrial Technology Research Institute (ITRI), Automotive Research and Testing Center (ARTC), Chung-Shan Institute of Science and Technology (CSIST), and Metal Industries Research and Development Center (MIRDC), showcased their latest R&D achievements to major players in the Chinese automotive industry.

Representatives from China included the delegation leader Dong Yang, vice chairman of the China Association of Automobile Manufacturers (CAAM), and senior representatives of the China Automotive Technology and Research Center (CATARC), FAW, SAIC, Dongfeng, Changan, Geely, and Chery; while participants from Taiwan included the heads of automakers Yulon, China Motor, Kuozui, Ford Lio Ho, and most major first-tier parts suppliers.

Auto industry groups from the two sides, including the TTVMA and TARC of Taiwan and CAAM and CATARC of China, signed three cooperative LOIs to accelerate Cross-strait exchanges in the automotive industry, including integration of resources to develop the global automotive market.

The first LOI was signed between CAAM and TTVMA to strengthen research, exchange, and cooperation among key industry sectors. The second was signed by TARC and CATARC to expand exchanges of market information, regulations, and testing/certification techniques. The third was signed between lithium-ion battery makers Power Source Energy Co., Ltd. of Taiwan and CITIC Guoan Mengguli (MGL) of China to develop power cells.

Significant Impact

Pointing out the political impact of such conference, industry experts say that Taiwan's auto parts makers especially stand to benefit for in the past they rarely could meet in person senior executives from Chinese automakers; so the conference set up a productive platform for interactions.

In addition and with China now the world's largest automobile market and third-largest auto production nation, setting up a platform of exchange between automotive players in Taiwan and China can effectively help the former gain first-hand, useful information on the China market, which may minimize damage from doing business with China without benefit of duty-free status made available through certain free-trade agreements.

Forecasts

ITEK-ITIS predicts that Taiwan will roll out NT$24.98 billion (US$768.62 million) in assembled vehicles in the first quarter of 2010, down 29.1% QoQ; and NT$37.25 billion (US$1.15 billion) in auto parts, an 8.2% QoQ decline. The expiry of the tax break will likely sap new car sales this year.

For 2010, Taiwan's automotive production value is expected to reach NT$259.63 billion (US$7.99 billion), up 4.3% from NT$237.7 billion (US$7.3 billion) in 2009, according to IEK-ITIS.

Taiwan's Automotive Production Value (2003-Q4 2008) Unit: NT$1 million
Period		Q209	Q309	Q409	QoQ	YoY	2008	2009(e)	2010 (f)	YoY
Assembled Vehicles	Medium & Compact (<2.0L) Passenger Cars	18,071	18,445	23,817	29.1%	123.3%	54,273	71,652	72,767	1.6%
	Large (>2.0L) Passenger Cars	4,252	3,522	3,510	-0.3%	50.1%	18,830	13,030	14,003	7.5%
	Light Trucks (<3.5 ton)	1,089	1,401	1,469	4.8%	-4.4%	6,224	4,805	5,249	9.2%
	Passenger & Commercial Vehicles	4,256	4,960	5,460	10.1%	113.2%	14,902	17,049	17,110	0.4%
	Heavy-duty Trucks/Buses	1,010	1,500	984	-34.4%	205.1%	2,685	3,786	3,063	-19.1%
	Sub-total	28,678	29,828	35,240	18.1%	102.2%	96,914	110,322	112,192	1.7%
Auto Parts	Engine Parts	2,643	2,681	3,049	13.7%	7.0%	12,133	10,697	12,124	13.3%
	Transmission Parts	3,143	3,735	4,888	30.9%	2.6%	21,790	14,930	21,267	42.4%
	Steering Parts	567	537	595	10.8%	35.1%	1,773	2,123	2,193	3.3%
	Electrical Parts	7,618	8,201	8,468	3.3%	19.8%	32,276	30,887	31,779	2.9%
	Brake Parts	1,307	1,395	1,479	6.0%	9.2%	6,089	5,258	5,328	1.3%
	Auto Gauges	286	304	336	10.5%	46.7%	1,166	1,167	1,300	11.4%
	Truck/Bus Body Parts	68	87	128	47.3%	-71.0%	1,035	307	850	177.0%
	Truck/Others Body Parts	148	196	230	17.3%	-7.3%	990	741	920	24.2%
	Other	17,604	18,949	21,415	13.0%	33.5%	74,969	72,574	71,680	-1.2%
	Sub-total	33,384	36,086	40,588	12.5%	21.4%	152,221	138,683	147,441	6.3%
Total		62,316	65,914	75,828	15.0%	49.1%	249,135	249,005	259,633	4.3%
Source: IEK-ITIS, February 2009

Exports of Taiwan-made Automotive Parts Worldwide (2009)
Rank	Country	November			Jan.~November
		Sales	Share	Growth	Sales	Share	Growth
1	U.S.A	4,292,149	33.86%	8.14%	47,020,694	37.20%	-6.01%
2	JAPAN	919,306	7.25%	-15.06%	8,733,192	6.91%	-13.34%
3	MAINLAND	638,254	5.04%	61.52%	5,040,057	3.99%	-13.60%
4	GERMANY	336,665	2.66%	3.69%	3,767,359	2.98%	-19.13%
5	AUSTRALIA	465,258	3.67%	26.44%	3,762,705	2.98%	-10.46%
6	U KINGDOM	283,029	2.23%	0.08%	3,329,321	2.63%	-7.80%
7	ITALY	280,465	2.21%	11.17%	3,187,501	2.52%	-17.81%
8	CANADA	295,884	2.33%	11.09%	3,063,110	2.42%	-13.49%
9	NETHERLANDS	252,167	1.99%	-5.31%	2,573,243	2.04%	-5.69%
10	MEXICO	250,497	1.98%	27.42%	2,441,014	1.93%	-17.22%
11	THAILAND	276,166	2.18%	1.03%	2,272,949	1.80%	-19.03%
12	SAUDI ARABIA	162,691	1.28%	-11.68%	2,022,090	1.60%	5.19%
13	SOUTH AFRICA	136,887	1.08%	23.26%	1,985,076	1.57%	-21.66%
14	PHILIPPINES	209,670	1.65%	37.48%	1,945,238	1.54%	-0.28%
15	U ARAB E	206,002	1.63%	-18.57%	1,932,929	1.53%	-29.39%
16	MALAYSIA	196,453	1.55%	18.95%	1,877,909	1.49%	-11.47%
17	SPAIN	133,346	1.05%	15.17%	1,418,437	1.12%	-12.58%
18	INDONESIA	145,495	1.15%	-6.34%	1,301,334	1.03%	-11.95%
19	EGYPT	185,697	1.47%	105.51%	1,201,230	0.95%	2.46%
20	TURKEY	140,267	1.11%	113.64%	1,175,465	0.93%	-12.00%
21	HONGKONG	106,335	0.84%	-27.93%	1,074,326	0.85%	-28.84%
22	SINGAPORE	118,509	0.94%	-5.82%	1,053,692	0.83%	-33.78%
23	BELGIUM	102,638	0.81%	13.02%	1,051,432	0.83%	-19.47%
24	VIETNAM	193,132	1.52%	357.21%	1,040,723	0.82%	62.98%
25	RUSSIA	82,219	0.65%	0.08%	965,981	0.76%	-27.91%
OTHERS		2,265,455	17.87%	8.10%	21,165,703	16.74%	-16.19%
TOTAL		12,674,636	100.00%	9.70%	126,402,710	100.00%	-11.50%
Sources：The Customs Import/Export Statistics.