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Taiwan’s Auto-parts, Auto-electronics Sectors Continue to Advance at High Speed
Taiwan's auto-parts sector, like what it did in the past 20 years or so, continues to be a significant part of the overall manufacturing industry on the island, to play a vital role to contribute to Taiwan's economic development and international trade. With the back by a big group of quality and innovative suppliers having been winning increasingly higher share in global market; as well as with the sector has been also increasingly tapping information technology, precision manufacturing and processing expertise to help exports increase steadily over the years.

Taiwan's auto-parts industry has been enjoying clear export-value gains for over a decade, with the only exception in 2009 or the year after the global financial meltdown that heavily impacted the global economy, to have grown into one of the globally-competitive traditional manufacturing lines on the island, one that continues to hold promise for further growth in the future rather than being threatened by digitization as some traditional sectors.

Global buyers know very well Taiwan has long been the most important supply base of many auto-parts product categories with unmatched global competitiveness; not only in quality and product comprehensiveness, but also reasonable prices and most satisfactory services. Among all parts exports from the island, the automotive lamp, body parts, rubber tire, rearview mirror, wheels and rim, and other vehicle parts together account for a very high percentage of 75%. The auto lamp alone, however, occupies a near-15% share in the island’s overall auto-parts exports.

Factors Behind Success
One of the most important factors behind this success, most informed observers and buyers agree, is a comprehensive, highly efficient subcontractor network that makes up a central-satellite plant system within which individual parts manufacturers specialize in specific processes. Besides boasting world-class precision where Taiwanese suppliers now turn out parts for aviation heavyweights and premium EV makers, this system enables high production flexibility, broad product range, lower production costs, and fast development time.

Another notable achievement is that the great majority of Taiwan's auto parts and accessory makers are small-to-medium-sized enterprises (SMEs) who have not built names as international heavy-weights, however, has not been hurdles to their popularity among global buyers, but have had to focus on export sales because of the relatively small domestic market. Approximately 80 percent of their exports go to the global aftermarket (AM), making Taiwan one of the world's most important supply bases for AM replacement auto parts, which is partly attributable to the makers' willingness to accept small orders. Statistics compiled by Taiwan Transportation Vehicle Manufacturers' Association (TTVMA) show that currently about 2,500 makers of auto parts and accessories (with total workforces of approximately 90,000 people) operate on the island, including approximately 300 original equipment (OE) suppliers, many of whom also produce AM products.

Head-up Way-through
With strong competitive advantages in the global AM parts market, Taiwan's auto parts makers have been enjoying stable export growth in recent years, with the only exception in 2009, when the global financial meltdown led to an 8.5 percent decline.

Data from TTVMA show that Taiwan's auto parts exports increased by 3.26 percent from a year earlier, or YoY, to hit a record high value of NT$214.5 billion (US$6.70 billion) in 2015. In the first 9 months of 2016, exports hit NT$156.7 billion (US$4.89 billion), down 1.98 percent YoY. However, some industry experts are optimistic about the seasonality factors might finally further push the value to another record high for whole-2016.


Year20052006200720082009201020112012201320142015

2016
Jan.-Sept.

Export Value4.04.154.624.774.375.355.786.096.186.496.704.89
Growth (YoY)0.48%3.83%11.3%3.18%-8.45%22.6%7.88%5.41%1.60%4.96%3.26-1.98%
*: January-September, 2016.
  Source: Taiwan Transportation Vehicle Manufacturers Association, Nov. 2016

Major Export Nations
The top-10 export nations for Taiwan-made auto parts in the first three quarters of 2016 did not change much from those in the past few years, and they were the U.S., Japan, China, the U.K., Australia, Mexico, Germany, Canada, Italy, and Netherlands. With close technical cooperation ties between auto assemblers in Taiwan and technical partners in Japan, the exports of Taiwan-made OE auto parts to Japan have been increasing thanks to good quality and cost competitiveness. The U.S. has been the most important export market for Taiwan-made collision parts (parts often replaced after vehicle collisions such as bumpers, engine hood, door panels, fenders, radiators, head and tail lamps, side mirrors, etc.) since 1990s, and the exports have been increasing in conjunction with the increasing adoption of AM parts by American consumers due to permission by their insurers, who agree to charge lower premiums based on relatively cheaper Taiwan-made AM parts, which is acceptable on warranty-expired cars but not on newer cars due to factory requirements.


No.CountrySalesShareYoY
1U.S.US$2.12 billion43.3%-3.27%
2JapanUS$299 million6.10%-2.47%
3ChinaUS$257.3 million5.26%1.27%
4U.K.US$175.4 million3.58%14.14%
5AustraliaUS$137.7 million2.81%4.07%
TOTALUS$4.89 billion100.00%-1.98%

Source: TTVMA, Dec., 2016

Exports of AM auto parts to Europe have also been increasing steadily in recent years, as more and more certification, such as TUV, Thatcham, etc., has made it viable for a rapidly increasing number of certified items to be accepted and opted by insurers and consumers for higher premium affordability, though the AM replacement parts market in the region just took off gradually a few years ago.

Ever-rising Automotive Electronics in Taiwan
Thanks to their increasing applications everywhere on a vehicle, from engine, body to chassis and safety, automotive-electronics systems are capturing a growing share of the value of a car, from about 26 percent in 2003 to over 40 percent in recent years. And as expected the more expensive the car, the higher the share occupied by electronics, it can even reach more than 50 percent particularly in upscale makes and models. Automotive electronics are being applied to play a vital role in the trend toward safer, higher-performance, cleaner, smarter, more energy-efficient, electric, and connected vehicles.

The greatest majority of Taiwanese automotive-electronics suppliers focus on four major market segments, including driver information (which accounted for 38% of Taiwan’s auto-electronics production in 2015, according to domestic industrial research institute Automotive Research &Testing Center, or ARTC); vehicle body (29%); engine powertrain (29%) and active/passive safety (11%).

Statistics compiled by ARTC also show that Taiwan’s overall automotive electronics production saw a clear and fast growth in the past decade, from NT$56 billion (about US$1.75 billion) in 2006 to NT$175 billion (US$5.47 billion) in 2015. Backed by Taiwan’s world-class electronics and ICT (information and communications technology) industries as shown by its significant subcontract capacities to turn out semiconductors and smartphones for major global brands, an increasing number of players on the island are developing advanced, reasonably-priced automotive-electronic systems and components for customers around the world.

Local companies have made significant headway in both the OE and AM segments of the auto-electronics market over the past years. Among their achievements are the development of tire-pressure monitoring systems (TPMS), lane departure warning system (LDWS), BLIS (Blind Spot Information System), telematics on-board units (OBUs), charge-coupled device/complementary metal-oxide semiconductor (CCD/CMOS) cameras, thin film transistor-liquid crystal displays (TFT-LCDs), engine control units (ECUs), AC/DC converters, light-emitting diode (LED) lamps, and night-vision systems. In recent years, their R&D focus has moved toward the Advanced Driver Assistance Systems (ADAS), and has achieved many fruitful results.

Taiwan’s relatively small assembled-vehicle industry means that there are not many international tier-1 automotive-electronics companies on the island, but a large number of local firms are outstanding tier-2 or -3 suppliers to global automakers. Many domestic automotive-electronics producers have not only gained a solid foothold in the supply chains of global automakers, but are also playing an important role in the Chinese market by supplying reasonably-priced, high-quality systems and parts to automakers there.

The MOEA says that the automotive electronics market will grow rapidly and become one of Taiwan's future star industries. The industry's explosive growth is already apparent, with production value rising from NT$56 billion (US$1.87 billion) in 2006 to some NT$100 billion (US$3.3 billion) in 2010, and NT$150.7 billion (US$4.7 billion) in 2014.

The Industrial Economics &Knowledge Center (IEK), an industrial knowledge center under the domestic Industrial Technology Research Institute, points out the annual production is expected to continue to grow by more than 10% in 2016, which will outstrip the island's overall assembled-vehicle production value. The knowledge center also points out that many Taiwanese automotive electronics makers have made inroads into the segments of navigation, infotainment, imaging systems, etc., and the majority of them have cultivated technical capability by tweaking their consumer-electronics products and solutions for applications in telematics-related fields.

Core Advantages
The core advantage of Taiwan's automotive electronics industry is its comprehensive supply chains that encompass makers able to turn out everything from machinery, molds/dies, sheet-metal parts, tires, and automotive lighting to vehicle infotainment, automotive semiconductors, MEMSs, car computers, and safety-related automotive systems. Such advantage readily positions Taiwan's automotive electronics suppliers to ride the strong growth momentum and meet the rapidly increasing global demand for parts and systems that make vehicles smarter, safer, cleaner, and more connected, with the island's relatively size and established supply network efficiently aligned to enable local subcontractors to effectively integrate resources. 

In recent years, an increasing number of major ICT conglomerates in Taiwan have ambitiously jumped onto the automotive-electronics bandwagon to seek potentially lucrative and promising business opportunities in the so-called 4C (computer, communication, consumer electronics, and car) or even 6C (including channel and content) segments. Their efforts have been paying off in the form of rising global shares in the automotive-electronics parts market, also driven by government's strong policy support. Such success must take into account the booming Chinese automobile market, reportedly the world's biggest by sales volume, that creates huge demand for high-quality, reasonably-priced, functional and innovative Taiwan-made automotive-electronics products. As an increasing number of Chinese automakers opt to procure such parts and systems developed by Taiwanese suppliers who generally are known to turn out better quality parts than mainland counterparts, opportunities to tap into global automakers' supply chains have also become more prevalent.

Taiwan's EV Industry Development Action Plan Aims to Create "EV Island"
A motivating force, unheard of only a couple decades ago, that has been partly driving and transforming Taiwan's automotive industry in recent years is clearly attributable to the global trend towards electric vehicles (EVs). Many companies in Taiwan continue to play significant roles in this green automotive industry as manufacturers of lithium-ion battery packs, electric motors, and power control units for high-profile international EV companies such as BMW, Tesla, and Fisker, among others.

In addition to the vigorous efforts of private companies over the past few years, Taiwanese authorities have also been fueling the rapid development of EV-related segments on the island through R&D subsidies and the commissioning of domestic research institutions to help develop newer, better technologies for transfer to the private sector. The ultimate goal is to build not only a local EV market with an extensive recharging infrastructure, but also an important global supply base for key EV systems and parts.

EV Strategy &Action Plan
Being one of many nations aggressively trying to promote the domestic EV industry and market development, Taiwan's Cabinet in late 2014 approved the new "Smart EV Development Strategy and Action Plan" proposed by the Ministry of Economic Affairs (MOEA), confirming that the island's EV industry development will focus on electric cars, electric buses, and electric scooters.

Industry insiders say that the original EV development plan approved by the Taiwan government allocated the lion's share of subsidies and resources to the electric car sector.

The new action plan extends the various EV pilot projects throughout Taiwan to 2016, with further extension to be discussed and an eye on achieving a local-content rate of 55 percent for key EV systems and parts two years later.

New Goals
Regarding the newly targeted electric bus segment, all the related government bodies, including the MOEA, Ministry of Transportation and Communications (MOTC), and Environmental Protection Administration (EPA), will jointly try to achieve the "10-year, 10,000 e-bus" goal on the island. The local-content rate is set at 50 percent and to be achieved by 2016, with the plan also calling for export of some key parts.

The government will also continue to subsidize the e-scooter segment on the island, aiming to set up a sound and more comprehensive e-scooter supply chain and boost the performance of Taiwan-made e-scooters. The action plan also the objective of increasing the number of e-scooters adopted in Taiwan to 37,000 units by 2017, with a self-content rate of 93 percent.

Upgraded Version
The original "Smart EV Development Strategy and Action Plan" was approved by the Taiwan Cabinet in April, 2010 and designed to drive the development of the EV industry in Taiwan, which also set up several EV pilot projects to evaluate viable operational modes and business models for EV makers. According to government officials, the collaboration between governmental units has achieved some initial success, with many Taiwanese EV-related makers having also built sizable technological capacity or formed cooperative ties with international customers/partners. Unfortunately, the penetration of EVs in Taiwan, as well as worldwide, remains a fraction of conventional gasoline-engine cars due mainly to lack of major breakthroughs in battery technologies, significantly higher retail prices of EVs, and consumer concern of EV cruise range and battery safety.

Among all the similar EV promotion goals worldwide, Taiwan aimed to introduce to the island only 3,000 battery electric vehicles (BEVs) by the end of 2013, with the achievement rate of 9.6 percent or 287 units, much higher than other nations'.

Specific Measures
Referring to other nations' measures and real-world conditions in Taiwan, the Taiwanese government reviewed and modified its Smart EV development project, and mapped out five strategies to promote the industry's development on the island, including cross-ministry promotion of e-buses, provision of more EV-purchase incentives, innovating EV operational modes, encouraging more operators to engage in the EV sector, and building EV industry value chains. According to the MOEA, these five strategies will be realized through the following specific measures.

1. The MOEA, MOTC and EPA will jointly promote the replacement of traditional internal combustion engine (ICE) buses with electric buses, including tour coaches and shuttle buses.

2. The government will continue to provide incentives such as commodity- and license-tax breaks for EVs to boost consumers' purchase willingness.

3. The government is implementing projects to "electrify" vans, trucks used at fruit and vegetable wholesale markets, as well as promote battery recycling systems.

4. Government-sponsored research institutes, such as the Industrial Technology Research Institute, Automotive Research &Testing Center and Metal Industries Research &Development Centre, are developing extended-range electric vehicle (EREV) and plug-in hybrid electric vehicle (PHEV) models to help private makers with commercialization of such products.

5. The government will continue to legislate and set up industrial standards to more effectively integrate upstream and downstream sectors, as well as set up local industry value chains.

Increasing E-scooter Popularity

The government also plans to further expand the regional scope of e-scooter pilot projects, as well as set up model operations in the local express delivery, home delivery and postal service sectors. Meanwhile, the government will continue to provide commodity-tax breaks for new e-scooters purchases in Taiwan and commission research institutes to develop high-performance e-scooters to tap major e-scooter markets and expand Taiwan's e-scooter exports.


Just few months ago, Taiwan's Executive Yuan (or Cabinet) announced that its subsidy program to promote e-scooter adoption on the island has achieved some initial success.

To help grow the development of the local e-scooter industry as well as promote the sales of such eco-friendly, short-distance commuting vehicles in Taiwan, the Cabinet set up a policy in 2009 aimed at replacing 50cc internal combustion engine (ICE) light scooters with e-scooters. In 2014, the "Intelligent EV development Strategy and Action Plan" was passed, after which the government began subsidizing e-scooter purchases and has carried various e-scooter demonstration projects (especially on closed circuits or roads such as school campuses). The e-scooter subsidies program will remain effective throughout 2017.


According to the government, annual sales of e-scooters reached 11,087 units in 2015, higher than the originally targeted 9,000 units and for the first time outstripped 10,000 units annually. In the past few years, the government has subsidized about 43,000 e-scooter purchases. A piece of encouraging statistic is that e-scooters accounted for more than 60 percent of Taiwan's overall light powered-two-wheeler (PTW) market (including motorcycles and motor scooters) in 2015, up from only 0.3 percent in 2009.



 

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