Tailift of Taiwan and Toyota to Set up Forklift Venture in Singapore

JV forecast to boost Tailift's consolidated revenue to US$1.61 Bn. by 2020

Compiled By KEN LIU

Chairman of Tailift Co., Ltd., Steve Lin, says his company, generally recognized as Taiwan's biggest forklift maker, will partner with Toyota Industries Corp., (Yahoo Finance: Toyota Industries Corporation manufactures and sells textile machinery, automobiles, and material handling equipment in Japan and internationally, having been founded in 1926 and headquartered in Kariya, Japan.) to set up a forklift venture in Singapore as the second step of their cooperation.

While insiders and industry executives have not openly commented on the choice of location of the new venture, one can speculate on several reasons, including the more liberal corporate tax structure in Singapore, generally more foreign-business-friendly environment with upscale lifestyle, urban conveniences, widely spoken English, being centrally located in Asia, its reputation as an Asian business and financial hub, and world-renowned strict enforcement of laws.

Lin projects the joint venture to help boost his company's consolidated revenue to over NT$50 billion (US$1.61 billion) by 2020, up from 2014's NT$11 billion (US$354.83 million).

The partnership with Toyota is driven by the Japanese firm's eagerness to expand sales in mainland China, where Toyota sells only about 4,000 forklifts annually versus its 20-percent-plus global market share in forklifts.

No. 3 in China

In contrast, Tailift is already the No.3 supplier in China, with annual production capacity of around 28,000 forklifts.

Toyota estimates the global market for forklifts at one million units a year, with industrially developed economies absorbing around 60 percent and developing economies including mainland China taking the remainder. In China alone, 200,000 to 250,000 forklifts are sold a year, with 80-90 percent being budget-priced models sold for about half the prices of those in the West.

The partnership enables Toyota to build a complete product lineup by including low-end and mid-range products to more effectively enter developing markets as China, Southeast Asia, India and South Africa.

The first step of the partnership is for Tailift to spin off its forklift business into an independent company, of which Toyota will acquire a 55 percent stake for around nine billion yen (US$75.63 million). Both parties agree that Toyota has the option to raise its stake to full ownership in five years with total investment of 16 billion yen (US$134.45 million).

The newly spun-off firm will take over the forklift manufacturing and production of other lifting machines, as well as brand-name operation of Tailift's factory in Qingdao, China, but will retain the factory's machine-tool operation which mostly focuses on manufacturing press, food-processing, laser-cutting, vertical-milling, and horizontal-boring machines.

Pricing Strategy

The company has opened a new firm to handle its Chinese operations with the strategy to sell its products at a 5 percent premium to the prices of the mainland's locally-made machines.

In addition to forklift and machine tools, Tailift also runs CNC punch-press, radial drill-machine, contract-manufacturing service, environmental-protection equipment businesses.

Lin says the cooperation with Toyota will also accelerate its plan to develop smart machines. His company has inaugurated several expansion plans in line with such ambitious project, including expanding its manufacturing site at the Nangang Industrial Park in central Taiwan and a recent acquisition of 150 hectares of land in Nantong, Shanghai, both of which will begin construction at the end of 2015 for total investment of around NT$3 billion (US$96.77 million) initially.

The two said plants, projected to start production by 2017, are designed to build CNC presses, radial drill machines, food-processing machines, tea-making machines, CNC horizontal boring machines, vertical milling machines, laser-cutting machines, and CNC laser presses.

According to Lin, his company has introduced its first portable robotic arm, on which the company will develop turnkey automation systems.

Background

Founded in 1973, Tailift began making radial drill machines, then branched into forklift and CNC turret-type press fields. To date, the company operates five factories in Taiwan and two factories in mainland China with 1,500-plus employees altogether.

Tailift entered China's forklift market around 14 years ago and has elbowed out international players Amada, Finn Power and Trump. Industry executives ascribe the company's success mostly to its well developed distribution channels in China not to mention offers of 10-20 percent price discounts relative to those of international competitors.