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Taiwan's Auto Production Surges 22.5% YoY in Q3, 2010

Mar 15, 2011 | By Quincy Liang

Taiwan's overall automotive production value, including that of assembled vehicles and auto parts, increased 0.8% quarter-on-quarter (QoQ) or 22.5% year-on-year (YoY) in the third quarter of 2010 to reach NT$81.3 billion (US$2.71 billion), according to the officially-backed Industry & Technology Intelligence Services of the Industrial Economics & Knowledge Center (IEK-ITIS) of the Industrial Technology Research Institute.

Relative to the same period in 2009, the production value of assembled vehicles declined a slight 0.02% to NT$38.1 billion (US$1.3 billion), but climbed 25.9% YoY. Medium and compact passenger cars accounted for 61.6% of the overall assembled-vehicle production value, followed by passenger and commercial vehicles that made up 19.3%.

The production value of medium and compact passenger cars (with engine displacements under 2.0L) increased about 6.2% QoQ, compared to a 40.2% QoQ decrease in large passenger cars (over 2.0L) and a 40.2% QoQ increase in passenger and commercial vehicles. IEK-ITIS attributes the clear growth of the last category to strong sales of both the LUXGEN7 sport utility vehicle (SUV) and the Hyundai ix35 SUV. In Taiwan, most of the SUVs are licensed under the passenger and commercial vehicle category.

A steady export market of locally made assembled cars has also contributed to the overall automotive production value. Statistics compiled by domestic Taiwan Transportation Vehicle Manufacturers' Association (TTVMA) show that some 11,462 Taiwan-made assembled cars, mainly local-made Toyota Altis sub-compact cars, were exported in the third quarter.

Auto Parts
Thanks to the stable new-car sales on the island, Taiwan's auto-parts production value increased 1.6% QoQ and 19.7% YoY to reach NT$43.2 billion (US$1.44 billion). The economic recovery in the United States has made consumers there more willing to replace old parts and accessories, supporting modest growth in Taiwan's auto-parts exports to the U.S.

Industry Dynamics
Several major issues that occurred during the third quarter of 2010 in the local automotive industry are expected to influence the future development of the overall line.

The first of these issues was that the Chinese central government approved the establishment of the Dongfeng Yulon Motor Co., Ltd., a joint venture between China's third-largest automaker Dongfeng and Taiwan's Yulon Group, the largest automotive conglomerate on the island, in late July of 2010.

Dongfeng Yulon is modifying an auto production factory (originally operated by Dongfeng) in Xiaoshan, Hangzhou of Zhejiang Province in China. The facility, with a targeted annual capacity of 120,000 assembled cars and 120,000 automotive engines in the first phase of construction work, is scheduled to begin mass production of LUXGEN brand multi-purpose van (MPV), SUV, sedan, and electric vehicle (EV) models, all developed by Yulon Group. The venture is capitalized now at RMB1.55 billion, in which Dongfeng and Yulon each holds a 50% stake.

Yulon's CEO Kenneth Yen and Dongfeng's chairman Yen Xu Ping signed the formal agreement to set up the new venture on September 29, 2010 in Beijing.

IEK-ITIS points out that the new venture is a major milestone for Yulon, which has been trying to develop its own car brand business so it can break its long-term role as only a local assembler (for Nissan of Japan) and also to overcome the constraints of the limited domestic market (around 300,000 units a year in these two years). Through the venture, Yulon is expected to have a much bigger market in China, and a greatly expanded sales volume will help cut costs and upgrade competitiveness. In addition, more than 30 Taiwanese auto-parts makers have also decided to set up production plants in Xiaoshan to directly supply products to Dongfeng Yulon, helping create a new way for local parts suppliers to participate in the world's largest automobile market.

Dongfeng Yulon is scheduled to push its China-made LUXGEN cars in the third quarter of 2011, and the company's previous distributor-recruitment activities attracted a flood of players with a strong interest in its products.

China to Limit Foreign Shareholding in EV Key-parts Ventures
China may promulgate laws or regulations to both prevent any joint venture in EV or related key-parts between Chinese and foreign companies and preclude foreign players from owning shares totaling more than 49%.

After becoming a member of the World Trade Organization (WTO), China lifted limitations on the shareholding of foreign enterprises in local joint ventures with Chinese companies. In the past, many international companies with technical advantages had very high stakes in their ventures in China and controlled the supplies of some key automotive parts.

To achieve technology independence and control the industry's future development, the Chinese central government hopes to localize the roles of the EV and key-parts industries in the big market.

The possibility of such a policy decision has triggered responses from many foreign companies and the impact is also expected to reach involved Taiwanese players involved.

Forecast
IEK-ITIS says that in the fourth quarter most automakers will try to promote sales to clear out their previous-year models, and also that in the new year consumers will want to buy cars to maintain the residual values of their vehicles in the second-hand market. So new-car sales are expected to ramp up due to automaker campaigns, then slow down in the final month.

In addition, IEK-ITIS says that exports of Taiwan-assembled Toyota cars are expected to continue to increase in the fourth quarter.

The research project forecasts that fourth-quarter assembled-vehicle production value to reach will be about NT$35.3 billion (US$1.2 billion) (which is when the government's subsidy to new-car buyers will expire), down 7.4% QoQ and 17.6% YoY. Production value of auto parts in the fourth quarter of 2010 was estimated at is forecast to be NT$41.5 billion (US$1.4 billion).

Taiwan's overall automotive production value, according to IEK-ITIS, wasis expected to decrease 11.2% YoY in the fourth quarter of 2010 to about NT$76.8 billion (US$2.6 billion).

With the fourth-quarter forecast, IEK-ITIS predicteds that Taiwan's annual automotive production value for 2010in all of 2010 is about to increase 21.8% YoY to about NT$317.3 billion (US$10.58 billion), including NT$149.4 billion (US$4.98 billion) from assembled vehicles (up 26.1% YoY) and NT$167.9 billion (US$5.6 billion) from auto parts (up 18.3% YoY).

Production Values of Taiwan's Automotive Sectors (Q3'09-Q3'10)
Unit: NT$1 million

Period

Q3'09

Q4'09

Q1'10

Q2'10

Q3'10

QoQ

YoY

Q4'10(f)

Assembled Vehicles

Medium & Compact (<2.0L)
Passenger Cars

18,445

30,096

23,721

22,095

23,467

6.21%

27.23%

22,262

Large (>2.0L) Passenger Cars

3,522

3,144

4,283

5,763

3,445

-40.23%

-2.19%

3,848

Light Trucks (<3.5 ton)

1,401

2,380

2,123

2,790

2,370

-15.06%

69.15%

2,188

Passenger & Commercial
Vehicles

4,960

5,438

6,187

5,258

7,373

40.24%

48.65%

5,543

Heavy-duty Trucks/Buses

1,940

1,568

1,551

2,222

1,465

-34.08%

-24.7%

1,460

Sub-total

30,267

42,627

3,7864

38,128

38,120

-0.02%

25.94%

35,301

Auto Parts

Engine Parts

2,681

3,051

2,858

3,188

3,249

1.92%

21.22%

3,055

Transmission Parts

3,735

4,752

4,624

4,713

5,044

7.02%

35.02%

5,268

Steering Parts

537

586

582

758

709

-6.44%

31.99%

625

Electrical Parts

8,201

8,917

8,691

9,594

9,105

-5.09%

11.02%

9,418

Brake Parts

1,395

1,519

1,452

1,642

1,600

-2.57%

14.68%

1,640

Auto Gauges

304

433

44

457

516

12.81%

69.54%

393

Truck/Bus Body Parts

87

159

329

410

536

30.72%

518.22%

286

Truck/Others Body Parts

194

308

210

427

294

-31.14%

51.23%

376

Other

18,949

24,130

21,543

21,319

22,125

3.78%

16.76%

20,405

Sub-total

36,084

43,856

40,731

42,508

43,178

1.58%

19.66%

41,468

Total

66,352

86,483

78,594

80,636

81,298

0.82%

22.53%

76,768

Source: IEK-ITIS, May 2010


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