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THE AUTOMOTIVE INDUSTRY TAIWAN Fact Pack

THE AUTOMOTIVE INDUSTRY TAIWAN Fact Pack Swedish Trade Council Taipei 2006 CONTENT Overview Taiwan Manufacturing Industry Taiwan Automotive Industry Recommendations References Appendix

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THE AUTOMOTIVE INDUSTRY TAIWAN Fact Pack

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  1. THE AUTOMOTIVE INDUSTRY TAIWANFact Pack Swedish Trade Council Taipei 2006

  2. CONTENT • Overview Taiwan Manufacturing Industry • Taiwan Automotive Industry • Recommendations • References • Appendix

  3. THE MANUFACTURING INDUSTRY IN TAIWAN IS ALMOST 2 TIMES AS LARGE AS THE SWEDISH MANUFACTURING INDUSTRY- the automotive industry is growing steadily in Taiwan • The total turnover of the Taiwan manufacturing industry is SEK 2,538 billion, there of SEK 101 billion from the automotive industry • the Swedish manufacturing industry’s turnover is SEK 1,357 billion • There are approximately 132,674 companies within the manufacturing industry in Taiwan • 2.7 million employees • The electronics industry is the largest and strongest industry in Taiwan • The average labor cost for an industry worker in Taiwan is SEK 62.13 per hour 5 largest manufacturing industries in Taiwan Billion SEK The automotive industry amount 4% of the total manufacturing industry Source: Ministry of Economic Affairs

  4. CONTENT • Overview Taiwan Manufacturing Industry • Taiwan Automotive Industry • Passenger Cars • Commercial Vehicle • Suppliers • Recommendations • References • Appendix

  5. THE TAIWAN PRODUCTION OF CARS AND COMMERCIAL VEHICLES TOTALS SEK 101 BILLION- the industry grew more than 10% 2005 Production cars and commercial vehicles industry in Taiwan billion SEK Components and accessories SEK 44,4 billion Vehicles SEK 57,6 billion Growth due to higher demand in the domestic market Source: Taiwan Transportation Vehicle Manufacturers Association

  6. 445,000 VEHICLES ARE PRODUCED IN TAIWAN- 323,000 passenger cars and 122,000 commercial vehicles VEHICLE MANUFACTURERS COMMERCIAL VEHICLES (122,000 vehicles) LIGHT TRUCKS (117,000 vehicles) HEAVY TRUCKS (5,000 vehicles) BUSSES (0 vehicles) PASSENGER CARS (323,000 vehicles) (Weight < 3.5 t) • 6 manufacturers • China Motor (45,000) • Ford Li Ho Motor (26,000) • Kuozui Motors (16,000) • Prince Motors (3,000) • Yulon Motor (23,000) • Taiwan Isuzu Motors (4,000) • Only domestic SKD with a volume of 1400 in 2005 • 8 manufacturers • Kuozui Motors (124,000) • Ford Li Ho Motor (54,000) • Yulon Motor (41,000) • China Motor (40,000) • Honda Taiwan (25,000) • San Yang Industry (22,000) • Prince Motors (14,000) • Formosa Auto (3,000) (Weight > 3.5 t) • 3 manufacturers • China Motor (2,000) • Kuozui Motors (3,000) • Taiwan Isuzu Motors (400) Source: Taiwan Transportation Vehicle Manufacturers Association

  7. CONTENT • Overview Taiwan Manufacturing Industry • Taiwan Automotive Industry • Passenger Cars • Commercial Vehicles • Suppliers • Recommendations • References • Appendix

  8. Passenger Car Production in Taiwan Development the last 5 years Steady growth of the car production Taiwan entrance to WTO in 2001 lowered the import tax for key components thereof the cost of vehicles which triggered the sales of cars In addition, macro economic growth and rising wealth are some of the other factors that increased the demand of cars New requirements on production of safety type cars has increase the demand of new cars Formosa Auto and San Yang (Hundai) entered the market THE PASSENGER CAR PRODUCTION IN TAIWAN IS INCREASING STEADILY - Entrance to WTO in 2001 triggered the car sales Vehicles

  9. THE MAJORITY OF PURCHASE DECISIONS ARE MADE IN TAIWANMOSTLY TOGETHER WITH THEIR CUSTOMERS- Choice of suppliers are based on global sourcing for optimal quality and price Passenger Cars Source: Taiwan Transportation Vehicle Manufacturers Association & interviews

  10. THERE ARE 8 CAR MANUFACTURING PLANTS IN TAIWAN - Kuozui Motors produce the most cars in Taiwan Taipei City Chung li Tucheng Chung li Yang mei Hukou San Yi Taichung Ping Tung Bold =Head office Source: Taiwan Transportation Vehicle Manufacturers Association

  11. FOCUS ON AUTOTRONICS, IMPROVED SUPPLY CHAIN AND COST DOWN PRODUCTION Trends within the Taiwan passenger car industry • Production is moving to mainland China and South East Asia • Due to cost down requirements and price competition on the market • Key components are still imported from US, Europe and Japan Globalization • Hybrids are entering the Taiwan market • Hybrids are actively introducing in Taiwan • Credit card loans for cars has been restricted which hit the sales of cars • OEMs improve ties with their suppliers for better efficiency and improved quality Market movements • Increase R&D spending to produce higher quality cars and integration of autotronics • Increase R&D investment in autotronics and telematics • Increase R&D in automobile safety • Increase cooperation with parent companies in Japan and US to enhance R&D R&D Source: Company interviews and ITRI

  12. CONTENT • Overview Taiwan Manufacturing Industry • Taiwan Automotive Industry • Passenger Cars • Commercial Vehicles • Suppliers • Recommendations • References • Appendix

  13. Commercial Vehicle Production in Taiwan Development the last 5 years Restriction to import sand from China has reduced the light truck sales High oil price hit the sales of trucks in 2005 DAF, Renault, Mercedes Benz have started to export to the Taiwan market Regualtion change in 2001 for heavy trucks of having a combination weight of 43 tonnes instead of 35 tonnes required the fleet companies to buy 3 axel trucks and trailers which spurred the sales of heavy trucks LIGHT TRUCK PRODUCTION IS DECREASING TOWARDS A MORE STABLE PACE- due to import restriction of sand from China Vehicles

  14. THE MAJORITY OF PURCHASE DECISIONS ARE MADE IN TAIWANMOSTLY TOGETHER WITH THEIR CUSTOMERS- Choice of suppliers are based on global sourcing for optimal quality and price Commercial vehicles Source: Taiwan Transportation Vehicle Manufacturers Association & interviews

  15. THE COMMERCIAL VEHICLE INDUSTRY IS CONCENTRATED IN THE NORTH AND CENTRAL OF TAIWAN Taipei City Kuanying Tucheng Chung li Yang mei San Yi Taichung Bold =Head office Source: Taiwan Transportation Vehicle Manufacturers Association

  16. FUEL ECONOMY AND NATIONAL SERVICE NETWORK FOR TRUCKS ARE THE MAIN FOCUSES Trends within the Taiwan commercial vehicle industry • High oil price hit the sales of trucks • High oil price has reduced the demand of light trucks • Increase of CKD trucks in Taiwan Market movement • Several new makers have entered the Taiwan market • New gas emission EURO4 law lead to more European maker entering Taiwan • Renault, Mercedes Benz and DAF has recently entered the market • Service networks are formed to provide better service for trucks in Taiwan Competition • Demand for commercial vehicles with better fuel economy • Demand for vehicles with low fuel consumption • Demand for vehicles with higher horse power Technology Source: Company interviews and ITRI

  17. CONTENT • Overview Taiwan Manufacturing Industry • Taiwan Automotive Industry • Passenger Cars • Commercial Vehicles • Suppliers • Recommendations • References • Appendix

  18. Taiwan automotive suppliers Geographical concentration of automotive suppliers Low High THERE ARE ABOUT 3,000 AUTOMOTIVE SUPPLIERS IN TAIWAN- Small family-owned companies with strong financial resources • There are approx. 3,000 suppliers for the automotive industry in Taiwan • There his a very high concentration of automotive suppliers in north and central Taiwan • Many of the companies have less than 100 employees and are family owned (70%) with strong financial resources • Traditional strong segments are engine parts, body parts (lamps), and rubber and plastics for interior • Most T1 Headquarters are located in Taipei City Taipei Tao yuan Taipei County Hsinchu Miao li Taichung Chang wha Tainan Tainan County Kaohsiung County Kaohsiung Source: ITRI and company interviews

  19. ALMOST ALL LARGE T1 SUPPLIERS ARE LOCATED IN TAIWAN T1 SUPPLIERS Electrical systems Interior equipment Propulsion Body Running gear Cables, bus systems, embedded systems • Shihlin Electric & Engineering • Taiwan Yuasa Battery • Ztong Yee Industrial • Taigene Electric Machinery • Safety Control Cable Cockpit, seats, dash-board, air conditioning • Matsushita Electric (Taiwan) • Hsin Chong Machinery Works • Uni Auto Parts Manufacture • Proton Electronic Industrial • E-Lead Electronic Power train, exhaust systems, engines • Uni Auto Parts Manufacture • Kaifa Industry • Shinfu • Taiway • Taiwan Nittan Industrial Body, roof, glass, doors, lighting etc. • Hsin Chong Machinery Works • GSK • Ta Yih Industrial • 3M Taiwan • Tai Yue Elelctric Suspension, brakes, axles, steering, tires • Cheng Shin Rubber • Tong Yang Industrial • Lioho Machine Works • Elite Sewing Machine • Federal Ranked by the size of the employees and recommendation from ITRI and industry sources * Other major T1 suppliers are listed in the appendix Source: Taiwan Transportation Vehicle Manufacturers Association, ITRI and industry sources

  20. ALMOST ALL PURCHASE DECISIONS ARE MADE IN TAIWAN- Some makers outsource the purchase decisions to their factories in China T1 Suppliers - Electrical systems Source: Taiwan Transportation Vehicle Manufacturers Association and company interviews

  21. ALMOST ALL PURCHASE DECISIONS ARE MADE IN TAIWAN- Some makers outsource the purchase decisions to their factories in China T1 Suppliers - Interior equipment Source: Taiwan Transportation Vehicle Manufacturers Association and company interviews

  22. ALMOST ALL PURCHASE DECISIONS ARE MADE IN TAIWAN- Some makers outsource the purchase decisions to their factories in China T1 Suppliers - Propulsion Source: Taiwan Transportation Vehicle Manufacturers Association and company interviews

  23. ALMOST ALL PURCHASE DECISIONS ARE MADE IN TAIWAN- Some makers outsource the purchase decisions to their factories in China T1 Suppliers - Body Source: Taiwan Transportation Vehicle Manufacturers Association and company interviews

  24. ALMOST ALL PURCHASE DECISIONS ARE MADE IN TAIWAN- Some makers outsource the purchase decisions to their factories in China T1 Suppliers - Running gear Source: Taiwan Transportation Vehicle Manufacturers Association and company interviews

  25. T1 SUPPLIERS ARE CLUSTERED IN MAJOR CITIES CLOSED TO THE VEHICLE OEMs- Most HQs are located in Taipei City Taoyuan Hsin Chong Machinery Works Taiwan Nittan Industrial Taoyuan Taipei City Hsinchu Uni Auto Parts Manufacture Taichung Hsin Chong Machinery Works Changhua Chia Yi Tainan Kaohsiui Bold =Head office Source: Company Websites

  26. ALMOST ALL LARGE T2 SUPPLIERS ARE LOCATED IN TAIWAN T2 SUPPLIERS Electrical systems Interior equipment Propulsion Body Running gear Cables, bus systems, embedded systems • Taigene electric machinery • Denso Taiwan • Man zai industrial • Safety control cable • Rainbow trust industrial Cockpit, seats, dash-board, air conditioning • Hsin chong machinery works • Jui li enterprise • Uni auto parts manufacture • Sentec E&F • San long industrial Power train, exhaust systems, engines • Porite Taiwan • Right Way • China terminals & electric • Fine blanking & tool • Taiwan Riken Body, roof, glass, doors, lighting etc. • Universal scientific industrial • Hamg Shing Technology • Toyooki (Taiwan) • Shin chin industrial • Kau hua industries Suspension, brakes, axles, steering, tires • Cheng shin rubber • Lioho machine works • Tung pei indsutrial • Elite sewing machine • Tiger steel Ranked by the size of the employees and recommendation from ITRI and industry sources * Other major T2 suppliers are listed in the appendix Source: Taiwan Transportation Vehicle Manufacturers Association, ITRI and industry sources

  27. ALMOST ALL PURCHASE DECISIONS ARE MADE IN TAIWAN- Some makers outsource the purchase decisions to their factories in China T2 Suppliers - Electrical systems Source: Taiwan Transportation Vehicle Manufacturers Association and company interviews

  28. ALMOST ALL PURCHASE DECISIONS ARE MADE IN TAIWAN- Some makers outsource the purchase decisions to their factories in China T2 Suppliers - Interior equipment Source: Taiwan Transportation Vehicle Manufacturers Association and company interviews

  29. ALMOST ALL PURCHASE DECISIONS ARE MADE IN TAIWAN- Some makers outsource the purchase decisions to their factories in China T2 Suppliers - Propulsion Source: Taiwan Transportation Vehicle Manufacturers Association and company interviews

  30. ALMOST ALL PURCHASE DECISIONS ARE MADE IN TAIWAN- Some makers outsource the purchase decisions to their factories in China T2 Suppliers - Body Source: Taiwan Transportation Vehicle Manufacturers Association and company interviews

  31. ALMOST ALL PURCHASE DECISIONS ARE MADE IN TAIWAN- Some makers outsource the purchase decisions to their factories in China T2 Suppliers - Running gear Source: Taiwan Transportation Vehicle Manufacturers Association and company interviews

  32. THE T2 SUPPLIERS ARE LOCATED NEAR THE VEHICLE OEMs - Most Headquarters has the same location as the factory Yang mei Keelung Toyooki (taiwan) Tao yuan Tao yuan Hsin chong machinery works Taipei Miao li Taichung Changhua Nan tou Kau hua industries Tainan Kaohsiung Bold =Head office Source: Company Websites

  33. THE TAIWAN SUPPLIERS ENHANCE ITS COMPETITIVENESS ON THE GLOBAL MARKET Trends within the Taiwan automotive supplier industry • Increase in production of parts due to higher global demand • Moving the production to China and South East Asia to lower production costs and expansion of capacity • Make Taiwan tier 1 suppliers to become global tier 1 suppliers • Seeking to enter the North American market Globalization • Focuses on small scale production of a wide range of products • Focus to enhance competitiveness in sales/ after sales service/maintenance system with hubs in US, Europe and Japan • Creating a national central support system to enhace operations for export of parts Competition • Government invest in R&D for engine and engine parts • 54% of the suppliers have their own R&D • 24% of the suppliers have technology transfer from foreign automakers • Taiwan IT companies have joint R&D with automakers in autotronics and telematics • Focus on improved quality, lighther weight and environmental friendly parts R&D Source: ITRI, Company interview

  34. CONTENT • Overview Taiwan Manufacturing Industry • Taiwan Automotive Industry • Recommendations • References • Appendix

  35. VENTURES WITH THE OEMs TO ACCESS ASIA MARKETS AS WELL AS HIGH QUALITY SOURCING Recommendations for making business with the Taiwan automotive industry Country specific Lucrative government incentives in business ventures, including substantial tax breaks and preferential loans for key component products such as engine/engine parts 1. Geographically positioned close to markets in Eastern Asia. Cultural ties to many countries in the region, especially Japan and China, make Taiwan an excellent spring-board to penetrate the markets in Asia 2. 3. A large well-trained, hard working and low-cost workforce as well as excellent capability to offer advanced technology with cost-efficient and high quality OEM manufacturing Industry specific Team up with the authorized international Taiwanese suppliers to access the local and foreign automotive makers in Taiwan as well as their operations in other markets 1. 2. Use well-established distributor in marketing and sales for the domestic market 3. Transfer technology for OEM production of automotives and parts Source: STC

  36. CONTENT • Overview Taiwan industry • Taiwan Automotive industry • Recommendations • References • Appendix

  37. HOW CAN STC TAIPEI SUPPORT COMPANIES TO DO BUSINESS IN TAIWAN Country specific Market Check and analysis Customized market check/analysis to understand the market condition and business opportunities Distributor search Customized distributor search based on requirements set by our client including a initial visit to the potential distributors in Taiwan Supplier seach Customized supplier search based on requirements set by our client including a initial visit to the potential suppliers in Taiwan IPO service Customized IPO (International Purchase Office) service in Taiwan for vehicle parts, machinery/machine tools, plastic/rubber products, metals as well as other products Busienss Support Office (BSO) 1. BSO service in order to set up and run a legal entity in Taiwan in a flexible, low cost and quick way 2. A STC consultant can spend X% of its time for our client´s marketing and sales support in Taiwan Legal service/ tender service Services in patent/trade mark registration, IPR-infringement and other legal/trade dispute matters as well as support in public tenders, employment and tax issues Investment service Find private and corporate investors to invest in Swedish busienss ventures

  38. STC TAIPEI HAS HELPED NUMEROUS SWEDISH COMPANIES TO DO BUSINESS WITH THE TAIWAN AUTOMOTIVE INDUSTRY

  39. STC CARRIED OUT A DISTRIBUTOR SEARCH FOR ABA OF SWEDEN Goal Outline of project The main objective of the project was to support ABA of Sweden in finding a distributor and initiate sales Step1: Distributor search STC role and contribution Kick-Off • Distributor analysis • Face 2 face business discussion with potential distributors • A market and distributor segment analysis • Evaluated the market potential and recommended interesting segments and distributors to initiate business discussions with • In-depth distributor analysis within recommended segments • Carried out of business meetings with potential distributors • Development of a recommendation plan for further business development with the potential distributors and follow up support Step 2: Add sales support Workshop I Workshop • In – depth business discussions with selected distributor and follow up support in sales Results • At the kick- off, the team from the Swedish Trade Council was educated and the project outline was discussed • At workshop 1, the Swedish Trade Council presented the results from step 1 and gave recommendation for how to approach the potential distributors • Found out that ABA of Sweden's market potential is in the car and truck segments • ABA of Sweden assigned one distributor in Taiwan and had profitable sales since start in 2004 • Other distributors are in business discussion with ABA of Sweden for other niche markets in Taiwan

  40. STC CARRIED OUT A TRADE POLICY ISSUE WITH NEGOTIATIONS AND LOBBYING TOWARDS THE AUTHORITIES AND EU OFFICE FOR VOLVO Goal Outline of project To assist Volvo Bus (herein after, Volvo) in a trade policy issue with negotiations and lobbying towards the authorities as well as EU office for formal negotiations Extensive negotiation and lobbying with the authorities and EU office Research and understanding of the trade policy for bus height and emission STC role and contribution Revised trade policy favorable for Volvo • Give Volvo a solid understanding of the Taiwan government regulation for bus height and emission. • Act as Swedish government official in negotiations and lobbying the trade policy issue towards the Taiwan authorities and EU office during 2003-2005 • Negotiated and carried out lobbying efforts together with several Swedish government officials on major trade events between Taiwan and Sweden Revised trade policy Policy analysis Negotiation and lobbying activities Results • Taiwan authorities revised the trade policy for the bus height and emisson favourble for the standards Volvo is using

  41. STC CARRIED OUT A TRADE POLICY ISSUE WITH NEGOTIATIONS AND LOBBYING TOWARDS THE AUTHORITIES AND EU OFFICE FOR SCANIA Goal Outline of project To assist Scania Bus (herein after, SCANIA) in a trade policy issue with negotiations and lobbying towards the authorities as well as EU office for formal negotiations Extensive negotiation and lobbying with the authorities and EU office Research and understanding of the trade policy for bus width and emission STC role and contribution Revised trade policy favorable for Scania • Give Scania a solid understanding of the Taiwan government regulation for bus width and emission. • Act as Swedish government official in negotiations and lobbying the trade policy issue towards the Taiwan authorities and EU office during 2003-2005 • Negotiated and carried out lobbying efforts with several Swedish government officials on major trade events between Taiwan and Sweden Revised trade policy Policy analysis Negotiation and lobbying activities Results • Taiwan authorities revised the trade policy for the bus width and emisson favourble for the standards Scania is using

  42. STC CARRIED OUT A DISTRIBUTOR SEARCH FOR HALDEX Goal Outline of project The main objective of the project was to support Haldex in finding a distributor and initiate sales Step1: Distributor search STC role and contribution Kick-Off • Distributor analysis • Face 2 face business discussion with potential distributors • A market and distributor segment analysis • Evaluated the market potential and recommended interesting segments and distributors to initiate business discussions with • In-depth distributor analysis within recommended segments • Carried out of business meetings with potential distributors • Development of a recommendation plan for further business development with the potential distributors Step 2: Add sales support Workshop I Workshop • In – depth business discussions with selected distributor and follow up support in sales Results • At the kick- off, the team from the Swedish Trade Council was educated and the project outline was discussed • At workshop 1, the Swedish Trade Council presented the results from step 1 and gave recommendation for how to approach the potential distributors • Haldex assigned one distributor in Taiwan for the automotive market and had profitable sales since start in 1994

  43. STC CARRIED OUT PROMOTION ACTIVITES AND MATCHMAKING FOR MECEL TOWARDS TAIWAN TELEMATICS COMPANIES Goal Outline of project To assist Mecel in promotion activites and matchmaking with potential customers and partners from Taiwan STC role and contribution Support in seminar and exhibition arrangements Support for business establishment in Taiwan Promotion activity at Sweden Taiwan Joint Business Council • Give Mecel opportunity to promote its company and technology to Taiwanese corporations and government organizations in Sweden • In addition assisted Mecel in seminar arrangement as well as support in an telematics exhibition in Taiwan Establishment activity Promotion activity Event promotion Results • Mecel has an agent in Taiwan to supports its sales

  44. CONTENT • Overview Taiwan industry • Taiwan Automotive industry • Recommendations • References • Appendix

  45. APPENDIX TIER 1 – ELECTRICAL SYSTEMS

  46. APPENDIX TIER 1 – INTERIOR EQUIPMENT (1/2)

  47. APPENDIX TIER 1 – INTERIOR EQUIPMENT (2/2)

  48. APPENDIX TIER 1 – PROPULSION

  49. APPENDIX TIER 1 – BODY (1/4)

  50. APPENDIX TIER 1 – BODY (2/4)

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