Su Yann-huei (蘇燕輝), who concurrently serves as chairman of Taipei-based Kuozui Motors Ltd. and Hotai Motor Co., is an understandably busy man. Nevertheless, Su made sure to set aside time on April 8 this year to attend Kuozui’s 30th anniversary celebration at Taipei’s landmark Grand Hotel. During the event, Chang Chia-juch (張家祝), head of the Ministry of Economic Affairs (MOEA), presented the entrepreneur with a medal honoring his leadership in Taiwan’s automotive industry. The presence of Akio Toyoda, president of Japan’s Toyota Motor Corp., the world’s largest auto manufacturer, lent the ceremony added gravity. Toyoda, who also received a medal from Chang, attended the event to honor the long working relationship between the Japanese company and its Taiwanese counterpart.
Hotai was founded in 1947 and became the sole Taiwan distributor of Toyota vehicles in 1949. In 1984, Hotai, the China Development Trust (today’s China Development Industrial Bank in Taipei) and Japan’s Hino Motors Ltd. founded Kuozui, with Hotai providing most of the investment. Kuozui originally focused on manufacturing commercial vehicles but shifted its focus to sedans in 1986 to meet increased consumer demand as Taiwan’s economy boomed. Since the switch to sedans, Toyota has provided Kuozui with investment and technology transfers. Today, Toyota is the largest investor in Kuozui, which operates two plants in Taoyuan County, northern Taiwan. In 2013, Kuozui’s factories produced more than 170,000 vehicles and earned about NT$91.2 billion (US$3 billion) in revenue.
The automobile industry is a major driver of economic growth in nations around the world because automakers require parts and tools produced by the electronics, machinery, plastics, precision instrument, rubber, steel and textile sectors, to name just a few. At the April ceremony, Chang praised Kuozui for boosting employment and economic growth in Taiwan, as well as for promoting the development of the nation’s finished automobile and auto parts industries.
When domestic automobile demand tailed off during the worldwide recession that started in 2008, the MOEA began promoting a policy aimed at boosting Taiwan’s exports of finished vehicles. Statistics from the Taipei-based Taiwan Transportation Vehicle Manufacturers Association (TTVMA) show that the policy has been a success, as the nation’s automakers exported around 82,000 vehicles in 2013, up from fewer than 10,000 in 2009. Kuozui manufactured more than 90 percent of the exported autos, most of which went to Middle Eastern countries such as Saudi Arabia and the United Arab Emirates. Taiwan’s other finished automobile exporters include China Motor Corp. (CMC), which is headquartered in Taoyuan. CMC is a subsidiary of the Yulon Group, Taiwan’s largest automotive conglomerate, and has engaged in technical cooperation with Japan’s Mitsubishi Motors since 1969. By the end of this year, industry experts predict that Taiwan’s combined exports of finished automobiles will reach a record high of 100,000 vehicles.
As for the domestic market, sales of locally made vehicles reached around 263,000 units in 2013. Imports, however, have seen increasing popularity in Taiwan over the past decade. Local companies manufactured more than 85 percent of all new cars sold in Taiwan in 2003, for example, but by 2013 that figure had dropped to 70 percent.
The TTVMA traces its roots back to 1948, when a group of around 20 small parts manufacturers and processing facilities founded the Taiwan Transportation Equipment Manufacturers Association, the TTVMA’s predecessor. The association adopted its present name in 1955. Today, the TTVMA has more than 600 members, including Kuozui and CMC. Both automakers also have representatives on the association’s standing board committee, which comprises personnel from Taiwan’s major automobile, motorcycle and automotive parts companies.
Automated bumper production at a Tong Yang Group plant in Tainan City, southern Taiwan. Tong Yang is one of the world’s largest makers of automotive collision parts. (Photo by Huang Chung-hsin)
Hsu Sheng-lung (徐勝隆), an executive senior specialist in the TTVMA’s Business Affairs Section, notes that Taiwanese manufacturers have carved out important roles in regional automaking networks. “Our companies have had extensive technological cooperation with foreign brands. Local enterprises have developed to the point that they can help partners supply vehicles to the Middle East and other markets,” Hsu says, adding that Japanese companies began authorizing more partners like Kuozui to build finished autos after 2011’s devastating earthquake and tsunami crippled production in Japan.
Annie Shih (石育賢) manages the Automotive Industry and System Research Department under the Industrial Economics and Knowledge Center, which is run by the government-supported Industrial Technology Research Institute (ITRI). ITRI is headquartered in northern Taiwan’s Hsinchu County and is the country’s largest research and development organization. According to Shih, the mainland Chinese market is expected to be the next big export opportunity for local automakers. Taiwan’s manufacturers are currently barred from exporting finished automobiles to mainland China, which is Taiwan’s largest trading partner. The two sides, however, are negotiating an agreement governing trade in goods as a follow-up to the Economic Cooperation Framework Agreement, which was signed in June 2010. Shih believes that the trade in goods pact is likely to have an effect similar to that of the North American Free Trade Agreement (NAFTA). After NAFTA entered into force in 1994, automakers in Canada and Mexico began manufacturing specific car models for the US market. “Taiwan’s automaking capacity and design capability will take off if mainland China becomes a major export destination for certain models,” Shih says.
Cliff Wu (吳浴沂), a professor in the Department of Vehicle Engineering at National Taipei University of Technology in Taipei City, says that Taiwan’s quality workforce and manufacturing competence are the main factors fueling the increasing exports of finished automobiles. Wu heads his university’s Vehicle Technology Research and Development Center (VTRDC), which was established in 2005 with funding from the MOEA’s Department of Industrial Technology and the National Science Council, which was upgraded and renamed the Ministry of Science and Technology in March this year. The VTRDC uses its research on vehicle communications, electrical engineering, information technology, materials science and mechanics to spur technical improvements and innovation in Taiwan’s automotive and motorcycle industries.
In 2005, Yulon set up a subsidiary named Hua-chuang Automobile Information Technical Center Co. (HAITEC) in New Taipei City. HAITEC not only provides integration services for automotive engineering, intelligent automobile systems and electric vehicle systems, but also develops components for intelligent systems and electric vehicles. “HAITEC isn’t an old-fashioned auto plant—it’s responsible for verifying and combining new technologies before they’re installed in cars on the production line,” Wu says.
HAITEC is also the developer and designer of vehicles sold by Luxgen Motor Co. Ltd., Taiwan’s first successful homegrown automotive brand (Yulon Motor Co. Ltd. performs the actual assembly). The brand’s first vehicle, the Luxgen7 MPV minivan, went on sale in Taiwan in 2009. Since then, the company’s cars have become a mainstream option not only in the domestic market, but also in Southeast Asia and the Middle East. “The emergence of Luxgen marks a major change from the way Taiwan’s auto industry has operated in the past,” Shih says.
More electronic and information and communications technology (ICT) components are finding their way into automobiles every year, and industry experts predict such systems will soon account for up to half of a vehicle’s value. Wu points out that HAITEC enjoys the advantage of cooperating closely with Taiwan’s strong ICT sector. “Quite a few local ICT companies have been working to extend their technologies to cars,” he says. ITRI’s Shih concurs, saying “To assure a more comfortable, safer driving experience, even ordinary items like lights and windshield wipers are being connected to intelligent electronic subsystems in cars.” In view of declining revenue in the computer, consumer electronics and mobile handset sectors, the growth of intelligent vehicle systems provides local ICT firms with a promising new business opportunity, she adds.
An American-style cruiser exhibited at this year’s Motorcycle Taiwan trade show. Taiwan’s Bailey Co. Ltd. has been manufacturing and distributing aftermarket parts for such bikes for more than 20 years. (Photo by Huang Chung-hsin)
Durable and Reliable
A company’s competence in manufacturing consumer electronics, however, does not necessarily translate to automotive electronics. “Any component installed in a car must be durable and reliable enough to withstand rigors such as heat and shock,” Shih says. “When you’re driving, you can’t afford to have a faulty electronic component cause a system crash. It’d be dangerous to have to wait for the system to reboot with traffic speeding past you.”
Hsu points out that while many Taiwanese companies are capable of making individual electronic components such as those found in a car’s entertainment system, relatively few are winning orders from major international vehicle manufacturers. To resolve that issue, component makers have begun tailoring their parts to meet the needs and specifications of large automakers. “It’s not an easy job and our companies are just beginning to show their competitiveness in this area,” he says.
Hsu’s TTVMA has helped ease the way for local automotive electronics makers by assisting in the organization of the AutoTronics Taipei trade show for the past nine years. This year’s event was held in April in conjunction with the EV (electric vehicle) Taiwan, Motorcycle Taiwan and Taipei International Auto Parts and Accessories expos. The chief organizer of the four annual events is the Taiwan External Trade Development Council, a nonprofit, government-backed organization that works closely with the MOEA’s Bureau of Foreign Trade. During their four-day run, the combined exhibitions attracted more than 1,300 exhibitors and some 7,000 buyers from 128 countries. All told, the shows resulted in some US$600 million in business deals. The 2015 event promises to be even bigger, as the Taipei International Auto Tuning and Repair Show is expected to join the four other expos.
Auto parts, both electronic and conventional, have long been a major export category for Taiwan. According to figures from the TTVMA, exports of Taiwan’s auto parts and accessories reached NT$197.9 billion (US$6.6 billion) in 2013, a 1.6 percent increase over 2012 and a record high.
Shih points out that in recent years, domestic companies have transitioned from making aftermarket parts to supplying parts to automakers on an original equipment manufacturer (OEM) basis. Many parts makers prefer to operate under the OEM model because orders tend to be larger and more stable than those for aftermarket parts. Major OEM auto components and parts now being made by local companies include body panels, lights and wheels.
Domestic machine tool makers have played a major role in helping parts makers shift to OEM production. Taiwan ranks among the world’s top five manufacturers of machine tools, and local companies are known for developing machines that are capable of turning out auto parts with increasingly complex functions, shapes and specifications. Wu notes, for example, that such support has helped Taiwan’s parts makers take on technically demanding jobs like manufacturing airbags, which must operate with absolute reliability and conform to a precise set of specifications.
A Kymco technician assembles engines on the company’s production line in Kaohsiung City, southern Taiwan. (Photo courtesy of Taiwan Transportation Vehicle Manufacturers Association)
Major players in Taiwan’s motorcycle industry have designed, manufactured and sold motorcycles and scooters for decades. Top companies in the field include Kwang Yang Motor Co. (Kymco), which was founded in 1963 and is headquartered in Kaohsiung City, southern Taiwan, and Sanyang Industry Co., which was founded in Hsinchu in 1961. The two companies have developed strong brands and grabbed a share of the domestic and overseas markets with products made in Taiwan, mainland China and Vietnam.
In 2013, Kymco, Sanyang and several other Taiwanese firms sold 915,000 finished scooters and motorcycles, nearly one-third of which were exported to markets outside Taiwan, mainland China and Vietnam. “Taiwan’s domestic motorcycle market is already quite strong, and steadily growing exports are helping manufacturers thrive,” Wu says. In 2013, for example, Taiwanese-owned motorcycle companies exported 122,554 vehicles to Japan, marking an 11 percent rise over 2012, and 47,123 to Colombia, a 58 percent increase over the previous year.
Air pollution was a serious problem in Taiwan in the early 1980s, and much of it was attributed to motorcycles, of which Taiwan has long had the world’s highest per-capita ownership. At the time, Wu worked to address the problem by conducting research on motorcycle emissions control systems for ITRI’s Mechanical and Systems Research Laboratories. Meanwhile, Taiwan and other countries began passing legislation aimed at reducing vehicle emissions.
Finding Success
The research efforts and tightened emissions standards spurred technical breakthroughs that saw motorcycles with environmentally friendly, fuel-injected engines gradually replace the smoke-spewing, two-stroke models of decades past. “Taiwan’s strict motorcycle emissions standards pushed local firms to develop cleaner technologies,” Wu says. “Now that’s helping them find success in the European market, which is known for its stringent emissions regulations.” In 2013, for example, TTVMA figures show that Taiwanese manufacturers exported 4,324 motorcycles to the Netherlands, a 52 percent rise over 2012, and 14,758 to Spain, an increase of 16 percent over the previous year. “Our locally made motorcycles, most of which are scooters, are now able to meet nearly every emissions regulation in the world,” Wu adds proudly.
While many still view automobile and motorcycle production as part of the traditional manufacturing sector, high-tech components comprise an increasing part of today’s vehicles. Climate concerns, consumer demands and high fuel prices are motivating manufacturers to develop and deploy advanced technologies in their quest to create more energy-saving, environmentally friendly and intelligent models. “Developing fuel-efficient, lightweight vehicles requires high-tech advances in materials science,” Shih says.
Looking ahead, Shih says transportation researchers are already beginning to investigate ways to integrate individual vehicles into a city or region’s smart transportation system, which will require manufacturers to engage in further creative thinking and industrial innovation. With decades of experience in the high-tech field and with thriving automobile and motorcycle industries, Taiwan is well positioned to confront and conquer such challenges.
Write to Pat Gao at cjkao@mofa.gov.tw