Taiwan Today

In anticipation that tariff rates for automobiles imported into mainland China from Taiwan will soon fall to zero, local carmaker Yulon Motor Co. announced it will put off plans to build an NT$20 billion (US$ 60.38 million) plant in Hangzhou. Yulon Motors had planned to build the automobile plant in order to produce its Luxgen model of cars. It had grown increasingly concerned recently because final approval for the plant was not forthcoming from the authorities in mainland China. With the likelihood that the proposed economic cooperation framework agreement will be signed with mainland China later this year, an alterative window of opportunity has now been opened to Yulon. Under the new plan, Yulon will assemble Luxgen cars in its Taiwanese plant located in Sanyi, and ship them directly to the mainland for sale. This would obviate the need for a new plant in Hangzhou. In his capacity as chairman of the Taiwan Transportation Vehicle Manufacturers Association, Chen Kou-rong, who is also the President of Yulon Motor, has been engaged in intense discussions with his mainland Chinese counterpart Miao Wei, on the possibility of zero-tariff duties for cars, starting as early as next year subsequent to the signing of an ECFA with Beijing. Chen has been authorized by the Industrial Development Bureau of the Economic Affairs Ministry to undertake the negotiations. It is likely that in the earlier stages of the free trade agreement there will be import quotas for both Taiwan and China, but Yulon will probably not exceed this number. The car company will also be able to make better use of its Sanyi plant, which is not running at full capacity. The new policy thus has several advantages. The Sanyi plant has the capacity to manufacture 120,000 vehicles per year, but demand for cars in Taiwan’s domestic market has dwindled in recent years, and the plant is said to be running at only 20-percent capacity. One market analyst said that among domestic car makers, Yulon has been the most active in ensuring that automobiles are among the goods covered by the first round of ECFA negotiations. Yulon also stands to gain the most from a zero-tariff policy, he said. It is pointed out that by not investing in the Hangzhou plant, Yulon stands to save at least NT$10 billion. If the imported Luxgen sells well in the mainland market, Yulon can always decide at a later date to reactivate its shelved plans. Nissan Motor, Yulon’s Japanese partner, has also postponed its expansion plans in the mainland. It is also possible that Yulon’s Sanyi plant can manufacture some models for China-based Dong Feng Motor Corp. These models could then be shipped back to the mainland market for sale. (CYH-HZW)