RESEARCH SNAPSHOT: Taiwan's auto industry
Taiwan has, due to its geographic position, political stance and population size, traditionally had both its import and export potentials defined by external factors. This quarterly report from Business Monitor International assesses prospects for its automotive market and industry.
In the importance of external factors, the remainder of 2012 does not look to be any different. In this light, we view the likely increase of sales to come in at around 6.5% over the course of the year - bringing total sales up to 314,806. However, we also see the car and passenger vehicle segment as operating below industry average, at 5.78%, or 254,699 cars sold (against the 240,780 sold in 2011). This has been attributed to reduced consumer confidence, with a number of factors targetted– including the ongoing European debt crisis as well as the performance of the American economy.
Beyond this, 2012 is an election year in Taiwan – and this has traditionally had a slowing effect on the economy. However, on the upside, China, the nearest, and indeed largest, export market for Taiwan, continues to grow at a strong pace. The ECFA which Taiwan signed with China in 2010, effective 2011, is likely to have significant upside risks on both exports and production, as both economies adjust to the new normal. However, a policy of always chasing new free trade areas is not necessarily the cure-all for Taiwan, as was recognised in meetings between Vice Economics Minister, Lin Sheung-Chung and EU officials in Brussels. It was recognised in public comments that new free trade areas between Taiwan and other economic entities may be complicated by Taiwan’s relationship with Beijing.
The threat of competitiveness is also one which needs to be considered – especially in light of the free trade area now enjoyed by South Korea and the United States. The ratification of this deal in late 2011 may well threaten international export capacity of Taiwan. Taiwan Today, a local newspaper, reports that up to 1,211 different categories of product will be affected by this agreement - with more than 4,500 different products going from South Korea to the United States losing their taxable status. Of particular concern is that the US has been one of the major export markets for Taiwanese auto parts – and that this FTA may make South Korea a comparatively more competitive player in this segment of the industry.
That said, the beginning of 2012 may well herald an above expectations year. March 2012 saw a very steep pick up in auto sales, with 6,941 cars being sold in the first ten days of the month. This represented a 58.6% increase on the same period of M212, and 3.6% up from Q211. This big jump has been mainly attributed to dealers launching specific marketing campaigns over the period, as well as the launches of new models. Toyota launched its first domestically built hybrid vehicle – the Camry hybrid – and Yulon Nissan also launched vehicles.
However, in the period Hotai remained the largest vehicles vendor on the island, occupying 39.8% market share – against 29.9% in January of 2012. March numbers also come on the back of a strong February. When monthly sales results were released for Q212, the increase in volume and value trading had a noticeable effect on the share prices of the segment as a whole – pushing it up over 1.55% against the rest of the market, reports focustaiwan. This is based on a volume growth of 26.6% y-o-y – however, it also represents a decline of 46% from January. This is mainly attributable to the intensive advertising and deals campaign which dealers follow in the first month of the year – which has a cyclic effect on the value of February sales. This would imply the economic fundamentals are in no way as bad as has been suspected – and that 2012 may well offer strong growth.
Japanese carmaker Honda Motor is expected to resume vehicle production in Taiwan by March 2012. The company was forced to halt its assembly operations in the country on December 15 2011 as a result of a shortage of components following serious flooding in Thailand, the Taiwan Economic News reports. Honda's suppliers in Taiwan are due to recommence operations in January 2012.
Tong Yang Industrial Co, the largest listed parts maker in Taiwan, announced January operation results in late Feb 2012. The head-line result was a slight decrease in terms of earning per share from the same month in 2011, but this is still markedly at pre tax earnings of US$3.9m, reports CENS. The company president, Crispin Wu, announced at the same time the expectations for significant growth over the course of 2012 – mainly based on two poles. One is the development of the core businesses of aftermarket care and original equipment production – and the other is the burgeoning domestic mainland Chinese market – expected to come in at around 8% over the course of the year. This certainly marks a growing trend in the Taiwanese auto market as a whole – that with a long period of efficiency and automation, on line capacity can be quickly increased in line with local demand.
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