TAIPEI, Taiwan – An assembled vehicle contains as many as 20,000 individual parts, and a lot of them eventually need replacing during the car’s lifespan.
Much of the auto industry here centers on supplying those replacement and aftermarket parts.
It is a profitable business, and Taiwan companies supply parts all over the world. But it has its limitations. Many Taiwanese auto parts executives speak of future business plans to become more involved as direct suppliers to automotive assembly plants.
The current global reach of the Taiwan parts industry is evidenced by the number of international attendees of the annual Taipei Auto Parts and Accessories Show, called AMPA. The upcoming one is scheduled for April 6-9 in conjunction with three other transportation expos in the Taiwan capital.
Last year’s event drew 1,016 exhibitors and about 42,000 attendees, including nearly 7,000 international visitors.
Most of the international attendees came from Japan (1,534), the automotive epicenter of Asia. Chinese (997) and American (512) visitors were second and third, respectively. “We definitely need more American buyers to visit our show,” says one event organizer.
Visitors come from all over, including South Korea and Thailand (two nearby nations with several vehicle assembly plants) as well as Malaysia, Germany, Indonesia, Philippines, Egypt, Australia, India, Canada, Vietnam, U.K., Saudi Arabia, United Arab Emirates and Russia.
“The show helps Taiwan parts, accessories and aftermarket companies do exports,” the bulk of their business, says Allen Chen, a project manager for event organizer Taiwan External Trade Development Council.
“It’s the only international show here for accessory and parts,” he tells WardsAuto during a pre-show media program in which eight journalists from seven countries visited six parts companies in Taipei, the nation’s capital, and Taichung, a sprawling metropolis to the south.
“Exhibitors show their newest products, and most of them expect to take orders from clients,” Chen says.
Taiwan’s automaking industry is relatively modest. About 400,000 cars are produced in the country of 23 million. Toyota, which operates a plant here, is the sales market leader.
Taiwan parts companies pride themselves on product quality. They are quick to tout their certification status and mark-of-excellence awards.
“They have a reputation for high-quality parts that are better than those produced in certain other Asian areas,” Tim Dunne, J.D. Power’s director-automotive analytics, tells WardsAuto. He was based in China and Thailand as a consultant and forecaster for Automotive Resources Asia, a firm he co-founded. J.D. Power acquired it.
E-Lead Electronics in Taichung is one of the few Taiwanese companies that are Tier 1 suppliers to automakers, although a big chunk of its business consists of aftermarket customers. OEM clients include Ford, FCA, General Motors, Honda, Nissan and Chinese automakers Brilliance and Geely.
“We follow the strict standards of OEMs,” says Steve Yang, E-Lead’s sales manager who holds an MBA degree from Cleveland State University. He once worked as an automotive market researcher in Ohio.
E-Lead product lineup includes infotainment systems, rear-seat entertainment systems and head-up displays.
Yang shows the latest products that allow enhanced connectivity between smartphones and infotainment systems. For example, people can use their phones to Google an address and then relay it to a vehicle’s navigation-system screen for step-by-step directions.
In April, E-Lead debuts its latest-generation head-up display system that shows vehicle speed, location, weather and navigation directions.
Although the image containing such information is reflected on a vehicle’s windshield, it appears by something of an optical illusion to be farther out, near the front hood of the car.
“The advantage is it keeps the driver’s eyes out front, looking ahead at the road versus looking at the bottom of the windshield,” Yang says. “It will be a new revolution for HUD.”
Like several Taiwan auto suppliers, E-Lead has operational branches in mainland China, where labor costs are lower.
Delicate Relations With China
China and Taiwan once were enemies. Self-governing Taiwan was born after Chiang Kai-shek’s army in 1949 lost a Chinese civil war to Communist forces and retreated to what was then called Formosa, an island off the mainland coast.
Relations between the two countries have thawed but aren’t exactly warm. In recent years, commercial deals have been struck, trade rose more than 50% and Chinese tourists, once barred from Taiwan, now visit by the millions.
But Beijing wants Taiwan to reunify with China. On the other hand, polling in an upcoming presidential election indicates most Taiwanese want to keep both their self-determination and distance from China.
Taiwan sees itself as a country while China views Taiwan as a province, but despite not seeing eye-to-eye on that issue the two share common interests, says J.D. Power's Dunne.
“There are mutual benefits,” he says. “There is a lot of financial and intellectual capital in Taiwan, and that’s a way to sustain a relationship with China.”
China and Taiwan in many respects simultaneously are business partners and competitors. Each has economic investments in the other, but Taiwanese businesspeople often speak of China as a rival. They also describe it as a vast market opportunity with a population of 1.2 billion people.
“We mainly face competition from China,” Yang tells WardsAuto. “We can’t compete with China on price, but our technology exceeds theirs.”
Doing business with Chinese automakers comes with challenges, he says. “They are always focused on keeping costs down, down, down.”
Meanwhile, he adds, “E-Lead has several projects going on with the U.S. auto industry.”
Down a narrow Taichung road flanked by patches of rice paddies is the headquarters of Cub Elecparts. It produces an assortment of replacement parts, including dimmer, headlight, power-window and ignition switches.
In contrast to E-Lead with its automaker customers, 85% of Cub’s business is in the aftermarket. “But we have a long-tail business strategy,” says Vice President Kevin Hung.
“We are always negotiating with car makers, but they have 10-year agreements,” he says, citing challenges of getting new OEM business. “However, we have a lot of opportunities.”
Cub sees itself as becoming a major-league player in tire-pressure monitor systems, as more countries mandate them through new-car safety regulations.
“They are required in the U.S. and Europe, and many people predict China will require them,” Hung says. “We see TPMS as becoming a profit center.”
TPMS batteries last about 10 years, Hung says, foreseeing a surge in replacement needs occurring in 2019.
Although TPMS sensor systems vary from manufacturer to manufacturer, he says Cub has developed two sensors that can go in just about any vehicle make and model.
“It cuts down on shop inventory,” Hung says. “If there are different cars needing different sensors, it becomes mission impossible trying to remember them all. We want to become the best universal TPMS solution in the world.”
Forbes names Cub one of the “Best Asian Companies Under $2 Billion.” The firm started in 1979, established an operation in China in 2007 and became a public company in 2009.
Going public is a double-edged sword, Hung says. It provides added capital “but everyone can read your financial statements,” which can tip one’s hand to the competition.
Seeking More OEM Business
Cada Industrial/Eristic exports 99% of its products. The vast majority is aftermarket. “We want to do more OEM business,” says Maggie Yang, an assistant manager.
The company headquarters in Taipei is adorned with displays of Asian art, crystal and wood carvings. The objects of beauty are in contrast to a company supply line that includes engine gaskets, manifolds, oil pans and seals.
Cada ships to the usual big markets of Asia Pacific, North and South America and Europe, where Germany is its largest customer.
“We want to go more into Africa,” Yang says. “And we want to do more OEM business in Japan, Germany and (South) Korea.” More potential U.S. business is in the future too. “It’s step by step,” she says of company strategy.
Mobiletron Electronics began 30 years ago with a staff of two. Today, it employs nearly 2,000 workers. It has two Taiwan plants as well as operations and divisions in China, Brazil, the U.K and the U.S.
It produces power modules, electric-motor controllers, stop/start systems, driver-assist systems, low-glare backup cameras, pedestrian-detection equipment and assorted sensors.
The company is particularly proud of its night-vision camera with a range of 650 ft. (200 m) under low-light conditions, says Robin Chen, director-marketing and sales. “We are a qualified supplier for automakers.”
“Taiwan is a very important producer of technology with economical costs,” adds Mobiletron Chairman and CEO Kim Tsai, whose company is a Tier 1 supplier in China and other Asian countries and a Tier 2 supplier in Europe.
Ultimate Goal: Worldwide Distribution
Depo Auto Parts Industries specializes in replacement headlamps that are nothing like the plain round ones of the old days.
Modern headlights contain intricate components, especially in the luxury-car segment, says Michael Hu, Depo’s executive vice general manager. “One Mercedes-Benz headlamp has 200 individual parts inside. With today’s ‘intelligent’ headlamps, you are not only producing the lamp but the software too.”
Depo replicates OEM headlights and fog lamps and sells them as replacement parts. The company pitch is they are as good as OEM parts, but cheaper.
The firm has successfully worked with U.S. insurance companies to become a preferred parts provider for collision-claims repair work. It’s a lucrative business because front and rear lamps typically are the first parts to sustain damage even in minor collisions.
“America is our best market, representing 30% of our sales,” Hu says. “China has a bigger population, but the U.S. is our biggest market. China is in the future for us.”
Depo has a subsidiary, Maxzone, and four warehouse sales offices in the U.S., but its biggest international investment is its five facilities in China, which includes two factories.
Hu says successful Taiwan business ventures with China depend on two things: technical know-how and human relationships. “If you have one and not the other, it doesn’t work.”
Nor does discussing political relations between the two countries, he adds. “Put that aside, and it’s not a problem as far as doing business.”
Europe is Depo’s second-biggest market, but it is a tough one because some automakers there hold copyrights on their headlamp parts and block the use of replacements from non-sanctioned suppliers, Hu says.
In the U.S., Depo has negotiated with the likes of General Motors, Ford and Chrysler to pay licensing fees, he says. “It creates a win-win situation. We’re trying to do the same in Europe. The best solution is that you open the market.”
Depo did well in Russia, but that nation’s currency exchange rate of late has hurt business, Hu says. “This year, sales revenue in Russia dropped 45%.”
Depo is growing. Its revenue in 2001 was $90 million. Last year, it was $485 million. It produces about 1 million automotive lamps a month.
“Our ultimate goal is worldwide distribution, and we expect our OEM business to improve,” says Hu, voicing a hopefulness common among Taiwan parts suppliers.
