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IEKView:Status of production and sales of Taiwan’s auto parts and opportunities for manufacturers
 

1. Overview of the development of the auto parts industry in Taiwan
There are close to 3,000 auto parts manufacturers in Taiwan and the industry supply chain is complete. Most of them are classified as small and medium sized enterprises. The auto parts industry has the advantage of small volume production with diversity and flexible manufacturing. It also has good international competitiveness due to the continuous investment in research and development and improvement in production technologies. Changes in the domestic auto parts market are subject to the influence of domestic demand for finished vehicle parts and export sales markets. On one hand, the domestic demand for finished vehicle parts is affected by sales volume of finished vehicles; on the other hand, it is also related to the ratio of local content, creating new development opportunities for auto parts manufacturers in Taiwan.

Constrained by domestic demand and the characteristics of the parts, most auto parts are earmarked for export sales and mainly in the aftermarket sector. The domestic vehicle market has had its ups and downs in recent years, however, through the strengthening of competitiveness by auto parts manufacturers, the export value has continued to expand annually, and the ratio of export sales for auto parts reached 74.5% in 2013. Leading manufacturers are getting into the OEM supply system of large international automakers through overseas investment and the establishment of factories, networks, sales and marketing outlets, technical cooperation and joint ventures. Considerable accomplishments have been accrued, aside from after-sales service and outsourced manufacturing, through the deployment of resources in the global market by the auto parts manufacturers. Taiwan’s automobile industry is limited by the demand of its domestic market, where challenging circumstances of slowdown in market growth and excess capacity have emerged. Surrounded by the bilateral free trade agreements signed by the respective regions and countries, the impact faced by the auto parts industry is far greater than that from finished vehicle makers.

2. Status of production and sales of Taiwan’s auto parts
Changes in the domestic auto parts market are subjected to the influence of domestic demand for finished vehicle parts and export sales markets. On one hand, the domestic demand for finished vehicle parts is affected by sales volume of vehicles; on the other hand, it is also related to the ratio of local content. In 2013, the production output value of auto parts was NTD 197.7 billion. With economic recovery driving the growth of export sales in auto parts, the estimated production output value of auto parts in 2014 will be NTD 214.25 billion, growing by 8.4% as compared with 2013. Figure 1 is the forecast of production output


Figure 1.  Forecast of production output value of Taiwan’s auto parts industry from 2012 to 2016

The central satellite system of the auto parts industry in Taiwan is complete, and auto parts manufacturers possess advantages in both molding and flexible manufacturing. However, market development is limited domestically, and the development focus of auto parts manufacturers is mainly on export sales. When product quality has reached international standards, manufacturers have progressively passed the relevant certification standards of auto parts for after-sales service in Europe and the U.S. The main auto crash parts being exported to the aftermarket are bumpers, sheet metal and rear-view mirrors, among which car lighting makes up 60% to 70% of the global ratio, rubber/plastic parts make up 85%, and bumpers make up as much as 90%.

In 2013, the production output value of auto parts was NTD 197.7 billion, which shows a slight increase of 0.6% as compared to NTD 196.6 billion in 2012. The main product types of auto parts were car lighting assemblies and components which made up the highest ratio at 15.4 % (NTD 30.32 billion). This is followed by auto electrical equipment and components which made up 8.6% (NTD 16.93 billion), auto transmissions as well as suspension systems and related parts which made up 7.8% (NTD 15.36 billion), auto engines and components made up 6.7% (NTD 13.19 billion), vehicle wheels and related parts which made up 5.6% (NTD 11.03 billion), and automobile braking systems and components which made up 4.0% (NTD 7.88 billion). Figure 2 shows the ratio of product types of auto parts.


Figure 2.  Ratio of product types of Taiwan’s auto parts

In 2013, the import value of auto parts imported into Taiwan was NTD 64.24 billion, which has reduced by 6.0% as compared to 2012. The main imported product types of auto parts were automatic transmission gearboxes and components (17.4%), motor vehicle parts (16.0%), diesel engines and related parts (6.6%), brake servo systems and components (4.3%) and car bodies and components (4.2%). The top 5 products made up 48.5% of the total import value. Figure 3 shows the ratio of the main product types of auto parts imported into Taiwan.


Figure 3.  Ratio of main product types of auto parts imported into Taiwan

In 2013, the export value of auto parts was NTD 152.68 billion which showed an increase of 3.0% as compared to 2012. The ratio of main exported product types of auto parts exported in order of scale were motor vehicle accessory parts (36.1%), vehicle bodies and components (12.0%), car lighting and related parts (10.9%), other vehicle lighting equipment and components (8.4%) and wheels and related parts (7.1%), as shown in Figure 4. The top 5 products made up 74.5% of the total export value.


Figure 4.  Ratio of main product types of auto parts exported from Taiwan

3. IEKView
The outlook for the global auto parts market and opportunities for auto parts manufacturers in Taiwan are as follows:
(a) Deployment of resources in the China market leans toward cooperation with large international manufacturers
Major international auto parts (Tier 1) manufacturers have already invested in China, and maintain their supply partnership with Tier 1 and Tier 2 vehicle makers in Mainland China such as the supply of products by Delphi to GM motors, the supply of products by Visteon to Ford motors and the supply of products by Denso to Toyota motors. It is not easy to penetrate into the supply chain system of international vehicle makers, so Taiwanese manufacturers have to focus on Tier 2 and Tier 3 auto parts manufacturers and ODMs in Mainland China as their target markets. They can enter the OEM and after-sales service markets in Mainland China by capitalizing on technical collaboration and capital funding cooperation, to overcome the issues of demand limitation and inadequate scale of the domestic market in Taiwan. Auto electronics manufacturers engaged in the R&D of advanced vehicle control and safety products differ greatly in terms of personnel, technical capabilities and scale of R&D when compared to the scale of major international vehicle makers. Seeking cooperation with large international manufacturers is a topic which needs to be considered by Taiwan’s auto parts manufacturers.

(b) Deployment of resources in emerging markets
Taiwan’s auto parts industry should set its sights on high-growth emerging markets which include Asia Pacific, Latin America and Eastern Europe. These will be the key growth regions for demand of auto parts in the future, especially in the emerging markets of India, ASEAN, Mexico, Brazil and parts of Eastern Europe, which are the key countries for development for the auto parts manufacturers. In response to the development of the auto parts industry in emerging countries, the common characteristics in the demand of emerging countries and their development focus in the future are auto electronics and new energy vehicles. The former is already a strength of Taiwan’s auto parts industry, and the latter is also under active development in Taiwan. Auto parts manufacturers in Taiwan should focus on auto electronics, key components of electric vehicles and product testing and certification, as well as actively deploying resources in emerging countries in order to strive for business opportunities.

蕭瑞聖(James Hsiao)

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