News Room - Business/Economics

Posted on 10 Apr 2008

Taiwan Auto-Parts Exporters Enjoy Growth 11th Year Straight in 2007

Over the years not only has the car assembly sector continued to grow in Taiwan and benefit from the proliferating development of the machine tool and IT sectors, the auto-parts manufacturing sector has also expanded over the past decade or so, with local makers no longer being limited to serving the domestic market, but also, as they steadily upgrade quality, technical and value-added content, have been taking significant strides to become suppliers of aftermarket (AM) auto parts globally. 

The statistics compiled by the Taiwan Transportation Vehicle Manufacturers` Association (TTVMA) show that the export value of Taiwan-made auto parts has risen rapidly in recent years, reaching NT$147.9 billion (US$4.81 billion at US$1: NT$30.8) in 2007, up 11.3% from a year earlier. More significantly is that the overall export value in 2007 again increased for the 11th consecutive year as favorable signs appear in the major North American, European and mainland Chinese markets, especially considering that the latter segment looks destined to grow into a car market only trailing the leader the U.S.

Taiwan has some 2,500 auto-parts makers in operation, with most being small- to medium-sized enterprises (SMEs); while AM parts account for about 80% of the total annual export value, and OE parts delivered to international automakers make up most of the balance.

World-leading AM-parts Supply Base

The auto-parts sector growth in Taiwan shows no sign of slackening any time soon. Already the world`s No. 1 supplier of AM auto-parts (commanding over 80% of North America`s "crash parts" market), Taiwan is expected to widen its industry lead in this segment as Europe opens its doors to replacement-parts imports; while Taiwan producers are also winning growing shares of outsourcing orders from major carmakers and tier-one parts suppliers in the U.S. and Europe.

Competitive in both quality and price, Taiwan`s auto parts makers have been showing greater presence on the international stage in recent years and the future looks even more promising.

In the AM parts business, many Taiwan companies invest increasingly more to keep a wide product variety, which is key to success as buyers generally prioritize the convenience of "one-stop-shopping." As affluence levels rise in emerging nations such as India and China, so will private car ownership, which would inevitably benefit AM parts suppliers; while the ultimate winners will be those capable of producing large variety in small batches.

Logistics is another key factor in the AM parts business. Taiwan AM parts suppliers are among the strongest worldwide in terms of container-consolidation and rapid shipment thanks to state-of-the-art inventory management systems and the clustering of AM parts subcontractors, which have been set up either in China or are naturally grouped together due to the relatively small size of Taiwan.

Becoming Global Suppliers

More and more Taiwan companies have successfully tapped into global automakers and tier-one parts suppliers` supply chains in recent years, which is hardly easy as automakers and major parts suppliers might keep exclusive partnerships for 50 to even 100 years.

Taiwan`s success in this segment owes not only to the cost-advantage of local producers who can deliver without compromising on quality, but also globalization and the liberalization of the China market, which have forced automakers and tier-one parts suppliers to look for suppliers with sharper competitive edge. For Taiwan auto-parts makers, linking with international supply chains is a way to survive-expanding beyond the saturated domestic market in which only about 320,000 to 340,000 new cars were sold annually in the past two years, enabling the local suppliers to tap OEM parts market outside the island. After years of technical cooperation with Japanese carmakers, parts suppliers in Taiwan are also increasing OE parts exports, especially to the overseas plants set up by Japanese automakers.

In short, Taiwan suppliers now serve numerous automakers and tier-ones in the U.S. and Europe, with such number certainly to rise in the next few years as many local suppliers are negotiating with major global purchasers.

Solid Advantages

While low cost has certainly given Taiwan auto parts makers a competitive edge, such is not the sole basis of success: Taiwan suppliers command a few other advantages that buttress their lead over potential competitors.

First, Taiwan auto parts producers are buoyed by a comprehensive and highly efficient central-satellite plant system that enables maximum production flexibility, product range and cost savings while minimizing development time; while such system also enables individual suppliers to specialize and excel in their field.

Another advantage of local auto parts makers is their division-of-labor manufacturing strategy: Setting up plants on both sides of the Taiwan Strait, producers can meet a range of customer needs in terms of pricing, quality, quantity, and shipment schedule.

Third, auto parts makers in Taiwan specialize in offering large variety delivered in small volumes, which enables efficient, flexible, and scientific management and cost-control, making Taiwan one of the best choices for purchasing AM and OE parts.