Sanyang Industry Co., the Taiwan-based maker of SYM-brand motorcycles and motor scooters, announced recently that it would use all possible means to win back its former title as the island's biggest manufacturer of powered two-wheelers (PTWs) this year, and that its overseas affiliates would challenge a total production volume of 380,000 units.

Over the longer term, the company wants to become one of the world's top five PTW producers by building up an efficient division-of-labor production network covering Taiwan, mainland China, and Vietnam.

Sanyang's president, Huang Kuang-wu, made these statements at the company's annual meeting with officials from domestic and overseas satellite plants. He also reported that the Vietnam subsidiary, Vietnam Manufacturing Export Processing Co. (VMEP), turned out over 235,000 two-wheelers last year to outpace the Taiwan plant's 215,000 units.

VMEP's 2002 profits, at about US$27 million, also outpaced those of the Taiwan parent, Huang noted, saying that this performance pointed to a bright future for the company's second production base.



Sanyang was Taiwan's first PTW maker. It set up VMEP in 1993 with an investment of US$5.5 million; VMEP is now one of the top three PTW makers in Vietnam and has two plants there, in Hanoi and Ho Chi Minh City. In addition to regular motorcycles and scooters, the plants also turn out "cub" light-commercial motorcycle models with engine displacements of 80cc to 150cc.

In addition to supplying the Vietnamese market, VMEP also serves as a regional export base and parts-supply center for the Asia-Pacific area.


Mainland Subsidiaries in the Red


The president said that Sanyang's two subsidiaries in mainland China, Xiashing Motorcycle Co. and Qingzhou Engineering Industry Co., are still in the red, despite recent "smooth" sales gains, because of fierce pricing competition.

Xiashing was established in 1993 and now operates a 400,000-square-meter factory in Fujian Province, where its annual production capacity is 500,000 PTWs and one million engines. It turns out over 40 models of motorcycles, scooters, and cubs.

Qingzhou Engineering was founded in 1997 as a spinoff from Sanyang's high-tech product and management departments, and runs a 140,000-square-meter plant in Jiangsu Province. This facility develops and produces major parts for PTW engines, and has an annual production capacity of about 150,000 units of pistons, cylinders and heads, crankshafts, transmission gears, and crankcases.

Huang noted that the three overseas subsidiaries expect to ship a total of 380,000 PTWs this year, including around 300,000 units from VMEP alone, generating revenues of NT$10.7 billion (US$307 million at NT$34.8:US$1).

The president pointed out that although the Vietnamese government plans to boost the PTW first-licensing fee to over US$200 (while canceling the import quota system for PTW parts), a move which is expected to slash annual demand for PTWs there from last year's 1.5 million to about one million, VMEP is confident that its superior quality will help it to keep growing via the capture of a larger market share. The company chalked up about 235,000 units in domestic sales in 2002.



In mainland China, meanwhile, Xiashing and Qingzhou are expected to record local sales of around 100,000 PTWs in 2003, up from about 80,000 units last year.

Huang also noted that he expects to sell 230,000 PTWs in Taiwan this year to win back the No. 1 position it lost to Kwang Yang Motor Co. (which makes and markets KYMKO-brand vehicles) in 2002. The domestic firm also expects to export more than 30,000 complete PTWs this year.

In its quest to reenter the ranks of the top five global PTW brands, the company is also strengthening its development capability. It recently spent about NT$300 million (US$8.6 million), not including land costs, to set up a world-class PTW development center in the northern Taiwan city of Hsinchu, which has a rich concentration of high-tech firms, and plans to pour an additional amount of at least NT$1 billion (US$29 million) in the development of PTW, automobile, and engine technology.


Escape Through Technology


In recent years Sanyang has reportedly poured an average of NT$600 million (US$17 million) annually into vehicle development, allowing it to escape from the technical control of its original partner, Honda Motor Co. of Japan, which has helped the firm gain world-class competitiveness.

The company terminated its PTW production ties with Honda in 1995 and set up its own brand, and in 2002 ended its 40 years of cooperation with the same Japanese partner in the domestic production of Honda car models, turning instead to Hyundai Motors of South Korea. Sanyang is the only manufacturer in Taiwan today that produces both PTWs and automobiles.

Huang said he believes that Taiwan's PTW makers are facing a serious challenge from lower-priced (but also lower-quality) counterparts from mainland China and Southeast Asian rivals, while their brand image is still inferior to that of the big international competitors. Because of this problem, Sanyang has been forced to strengthen its ability to respond to the global market by introducing new and better models to fill out an ever-diversifying product line with technical advantages. Also, Huang added, a globally competitive parts-supply chain is needed to strengthen its competitive edge.

In addition, the company is aggressively pushing its automobile-production business, hoping to climb back into the local top-five rankings again (where it was when it made Honda models), possibly as soon as this year. It introduced its first Hyundai model, the Elantra sedan, late last year; the market response has been disappointing, however, because this model has no distinctive advantage over similar models sold on the island and because local consumers are still uncertain about the quality of South Korean cars.

In response to these doubts, Huang noted that Hyundai already ranks seventh among the world's auto makers, and insisted that its quality has proven to be as good as that of the big international brands. He said he wants to use Sanyang's long-term accumulation of experience and resources to promote sales of South Korea's cars in Taiwan, and he said he also expects his company to become a vital part of Hyundai's global parts-procurement network by providing parts with high quality at competitive prices. Sanyang hopes to sell 18,000 Hyundai cars this year.