Taiwan firms advised to cooperate with major automakers in China

This article was published by the Taiwan Headlines on September 22, 2006. It reports that according to some industry insiders, Taiwan's auto and parts makers should cooperate with the top-15 automobile-manufacturing conglomerates in China, in fields such as automotive electronics, fuel cell, weight-cutting, and hybrid-power. The aim is for Taiwanese companies to gain footholds in Beijing's 11th five-year plan to make China one of the world's top-three automakers by 2010.

The aforementioned advice was made at a recent industry seminar in Taiwan, which was organized by the Industrial Economics and Knowledge Center (IEK) under the Industry and Technology Intelligence Services (ITIS).

For example, according to the Taiwan Transportation Vehicle Manufacturers' Association, about 5.76 million new cars were sold in China in 2005, compared to the global volume of about 61 million units. This made China the third-largest car market in the world in 2005. In 2006, new-car sales in China are expected to reach about 7 million units, which will enable China to replace Japan as the world's No.2 market for cars.

More significantly, new-car sales in China are expected to reach about 10 million units in 2010. The annual production volume in China is currently 5.79 million units.

According to the Taiwan Transportation Vehicle Manufacturers' Association, Beijing's 11th Five-Year Project aims to make China one of the top-three carmakers through several strategies. These include imaginative development of home-grown brands and techniques; cultivation of internationally competitive automobile conglomerates and parts suppliers; encouragement of complete-auto and auto-parts exports; accelerating enterprise restructuring; and development of energy-saving and environmentally-friendly vehicles.

Specifically, for Taiwan's companies, automotive battery, automotive electronics parts, core materials and other fuel-saving devices and technologies are windows of opportunities for business development across the Taiwan Strait.

In 2005, China's auto exports reached 164,000 units, which exceeded the 161,000 imported for the first time. Meanwhile, in the first six months of 2006, China's auto exports reached 141,000 units, while only 103,000 were imported. According to the Taiwan Transportation Vehicle Manufacturers' Association, most of the assembled vehicles exported from China are under-5-ton commercial types and 1.0L-1.5L passenger cars. However, Taiwan's companies are advised to focus more on medium- to high-end cars for the China market.

Other industry observers from the Industry and Technology Intelligence Services suggest that Taiwan's companies should hold firmly their advantageous small-batch, large-variety production mode and try to tap into international tier-one parts-supplier chains in China. Specifically, Taiwan's auto suppliers should choose the top-15 automakers in China as targeted partners in order to assure stable orders. However, they need to be careful about the excess capacity and profit margins of these major Chinese automakers.

Finally, Taiwan's companies are advised to upgrade their product development and quality, as well as delivery and cost-control, in order to enhance their feasibility of joint new-car development with Chinese automakers.