Taiwan's Auto-parts Exports Score Another Record in 2013: ARTC

For many years, car sales in emerging markets, especially Southeast Asia, Eastern Europe, and Latin America, have outpaced those in industrially advanced areas, prompting international carmakers to adopt regional division-of-labor schemes in response. This change in the global automotive industry is reshaping the development of the global auto-parts industry, one result of which is that Taiwanese suppliers in the line, with their unmatched competitive advantages, have been playing an increasingly important role in the global market and chalking up repeated records in export sales.

Exports of Taiwan-made Auto Parts (2002-2013) Unit: NT$ billion
Year		2002	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013
Exports		91.2	107.8	127.4	128.0	132.9	147.9	152.6	139.7	171.3	184.8	194.8	197.9
Growth		15.4%	18.2%	18.1%	0.45%	3.8%	11.3%	3.2%	-8.5%	22.6%	7.9%	5.4%	1.6%
	Source: Taiwan Transportation Vehicle Manufacturers Association, Automotive Research  Testing Center, May 2014

In 2013, global sales of new cars reached a new record high, leading to increased demand for Original Equipment (OE) parts, and sales of aftermarket (AM) replacement auto parts also continued to expand along with growing car ownership throughout the world.

This situation helped Taiwan's auto-parts exports to increase 1.6% to another record high, for the fourth year in a row, of NT$197.9 billion (US$6.6 billion). According to the Automotive Research & Testing Center (ARTC), the most important transportation vehicle R&D and testing hub in Taiwan, the island's auto-parts exports evidenced a clear growth trend over the past 10 years (with the exception of an 8.5% decline in 2009 due to the global recession). From 2010, thanks to the recovering global economy and burgeoning new-car sales, strong demand for auto parts has been driving Taiwan's auto-parts exports to new heights. The economic chill in Europe led to minor decline in the first half of 2013, but the strong demand from North America in the second half led to a 1.6% increase of for the year as a whole.

ARTC explains that due to Taiwan's small domestic market, most local auto-parts makers are small- to medium-sized enterprises (SMEs) focusing on exports of AM products. Willing to fill small-batch, large-variety orders, these suppliers have built up comprehensive product lines that can meet global needs. An increasing number of parts suppliers are setting up product warehouses or factories overseas in order to ship directly to local markets, or are establishing technical partnerships and joint ventures to tap the OE parts supply chains of international automakers. Others are boosting their global sales via Internet marketing or frequent participation in auto-parts shows in targeted markets.

International auto-parts buyers generally know about the comprehensive, highly efficient subcontractor networks, or central-satellite plant systems, that enable Taiwanese parts manufacturers to specialize in certain lines and achieve high production flexibility, broad product range, low production costs, and fast development time.

There are currently about 2,800 makers of auto parts and accessories in Taiwan, including approximately 300 OE suppliers, many of whom also produce AM products. In recent years more and more international automakers have been increasing parts-outsourcing, especially those in Europe, Japan, and the U.S., in order to cut costs and cope with the fierce competition in the industry. This, according to ARTC, creates opportunities for local players, both OE and AM suppliers.

Export Markets, Export Products
Of the NT$197.9 billion (US$6.6 billion) worth of automotive parts exported from Taiwan in 2013, some NT$74.9 billion (US$2.5 billion) went to the U.S., for a 38% share of the total. Japan, China, Australia, and the U.K. completed the list of top-five export markets. Exports to the U.K. grew by 19% last year, making it the market with the highest rate of growth, due to growing new-car sales there. In continental terms, North America is currently the largest export market for Taiwan-made auto parts, absorbing about 40% of the total, followed by Asia  with 25% to 30% and Europe with about 20%.

Taiwan's major auto-parts export categories include auto lamps, sheet-metal body parts, rubber tires, side-mirrors, wheel rims, and other parts/accessories, which together accounted for about 75% of all exports of such products from Taiwan in 2013. All major export product categories, with the single exception of rubber tires, enjoyed growth. ARTC explains that when the U.S. government stopped levying punitive tariff rates on China-made tires in 2013, many orders flowed back to lower-cost Chinese makers. Exports of Taiwan-made auto lamps and sheet-metal body parts, by contrast, experienced spectacular growth last year, thanks to strong demand for AM collision replacement parts from North America.

Good Start for 2014

Auto-parts exports from Taiwan totaled NT$29.7 billion (US$990 million) in the first two months of 2014, a 5.8% growth from a year earlier. ARTC forecasts that exports for the year as a whole will hit yet another record high, because new-car sales in China and the U.S., the world's largest two automobile markets, are continuing to rise and the European economy is gradually recovering.

Opportunities for Taiwan
ARTC expects that rapidly increasing new-car sales in emerging markets will create lucrative business opportunities for Taiwanese parts makers, but believes that the real opportunities lie in automotive electronics and new-energy vehicles. The center urges local parts makers to attract more orders for OE parts, and strengthen their international competitiveness, by devoting more resources to the development of key technologies and patented products.

Taiwanese auto-parts makers that can win strong backing from Taiwan's world-class information and communications technology (ICT) industry, ARTC explains, and take advantage of their own experience in the global parts market, can expect to further expand their share of the automotive electronics market.

At the same time, ARTC adds, the government's efforts to sign more free trade agreements with other nations and regions are another vital factor in the island's export competitiveness.