China has become the largest importer of auto parts to Taiwan. How can Taiwanese factories withstand ASEAN and red supply chain attacks?
Text: Kang Chengang Photo source: Photo by Huang Mingtang
China’s automotive supply chain has rapidly emerged and has become Taiwan’s largest importer of auto parts. ASEAN is favored by Japanese car manufacturers and its production capacity continues to grow. Caught between the two giants, Taiwan’s auto parts industry is facing a life-or-death battle. How can it find a way out?
In 2023, Taiwan’s auto market will have a bright future that has not been seen in many years. The total sales for the year will reach 476,000 vehicles, setting a new high in 18 years. All auto brands are celebrating happily. But at the same time, domestic auto parts manufacturers are worried and unable to laugh.
“There is a sense of threat in the entire industry, and there is a lot of competitive pressure,” Jiang Ruikun, general manager of Huiguo Industry, a Taiwan subsidiary of Aisin Seiki, Toyota’s main supplier, said in a worried tone as he walked in his own factory.
Jiang Ruikun is worried because consumers are buying non-domestic cars. Last year, the sales volume of domestically produced cars was only 243,000, which has been below 250,000 for six consecutive years. The market share of 51% is a new low in recent years. According to statistics from the Taiwan Automobile Industry Association, the import volume of auto parts in the first ten months of last year exceeded NT$100 billion, and is expected to hit a record high for the whole year. “This is no longer a battle of success or failure, but a battle of life and death,” Jiang Ruikun believes.
The battle of life and death in the domestic automobile supply chain
The domestically produced cars are weak, the quality of suppliers in China and Southeast Asia has improved, and car manufacturers have increased cross-border dispatch, all of which have plunged Taiwan’s higher-cost automobile industry chain into a life-or-death battle. Secondly, China has already surpassed Japan and become Taiwan’s largest source of imports of auto parts. Imports in the first ten months of last year reached 31.8 billion, accounting for 30% of the total for the first time.
When China’s automobile supply chain is established, it will in turn affect Taiwan. Because most of the plastic and metal raw materials specified and certified by car manufacturers are in China, the Taiwanese factory imports more freight and tariffs, and the raw materials account for more than 60% of the cost of parts. “At the prices sold in China, I may not be able to buy the materials alone.” ,” Jiang Ruikun smiled bitterly.
The threat from Chinese parts to Taiwan is ongoing, while the threat from Southeast Asian parts to Taiwan is in the future. In particular, Japanese automakers, which account for more than 70% of domestically produced cars, are heading south.
You Minghui, chairman of Feng Xiang, who has been producing automobile and motorcycle parts in Vietnam for many years, explained that current car factory plans usually tend to mass-produce components in a single factory in the region and then deliver them to the OEM for assembly to increase scale, share mold costs, and reduce raw material procurement. cost.
ASEAN countries have tariff preferences, making it easier to achieve such a regional dispatch model. However, Taiwan, which has not joined ASEAN and the Regional Comprehensive Economic Partnership (RCEP), has become a disadvantage in the region.
Faced with the attack from China and Southeast Asia, Taiwan’s auto parts industry has turned its worries into actions and is ready to fight.
Get rid of pure OEM, transform into ODM and aim overseas
Taiwan is not without success. The most famous one is that Guorui launched the “TTT 30” campaign in 2015, which means Team Taiwan Toyota (Taiwan Toyota Team) jointly reduced vehicle costs by 30%. Relying on various supply chain innovations in production lines, Guorui finally defeated factories from various countries and won orders for Altis models exported to the Middle East.
Now, in response to the group’s layout and the situation in Taiwan, Huiguo decided to change its path and escape the role of pure manufacturing. Jiang Ruikun saw that the number of electronic components in automobile components is increasing. Taiwan has a mature electronic component supply chain. Huiguo can serve as the supply chain or purchaser of Toyota automobile electronic component modules, not just production.
For example, automotive lens modules that require the integration of lenses, circuits, and plastic modules, or safety door locks composed of sensors and mechanical components, are products that Huiguo is actively recommending to the parent factory for production in Taiwan.
And he not only wants to lead Huiguo’s transformation, but also hopes to join other industry players in going overseas to fight in groups.
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2024-01-30 02:03:21
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