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Home > Articles > The Automobile Industry

Taiwan's Automotive Policies - Part 3



Auto Parts Industry
The development of the auto parts industry, especially the more complex original equipment parts, mirrors that of auto assembly. The degree of dependency of Taiwanese parts suppliers on Japanese technology increases with the technological sophistications of the parts. As no single assembler could provide significant economies of scale, most parts producers supply to all assemblers. Though this helped to increase volume and achieved some degree of economies of scales, there was little technical cooperation between the assemblers and the parts suppliers. This is because assemblers were unwilling to invest significantly in the suppliers, as they worried that the technical improvements achieved by the suppliers would benefit other assemblers. In addition, like the Japanese carmakers, the Japanese auto parts firms were also reluctant to transfer more advanced production technology and design capability to their Taiwanese affiliates.

Unlike the producers of original equipment parts, the auto part makers for the replacement market have been more successful. The exports of auto parts, mainly for the replacement market, increased 9.3% annually from US$770 mln in 1986 to US$3.8 bln in 2004. America, China (including Hong Kong) and Japan were the top three export destinations, with 35.6%, 14.8% and 6.3% of total exports sold to these countries respectively in 2004. The rapid growth in the auto parts industry is mainly because the technological sophistication required to produce these parts is much simpler. As a result of this, the volume required to achieve significant economies of scale is lower and many small and medium-sized enterprises were able to break into international market with competitive pricing. Though production technology originally came from Japan, many auto producers for the replacement market have managed to reduce dependency on their Japanese partners by investing in research and development themselves as the technical hurdle is lower. Thus, their overseas expansion strategies would not be subjected to Japanese control.


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Taiwan's Automotive Policies (Pt4)>>