Taiwan Autos Report 2007

Lean times continue in Taiwan's automotive industry, with BMI's sales forecast for 2006 in our recently published Taiwan Automotives Report, projecting a 25% decline in sales and a revised forecast of a 31% decline in output. This is in light of results for the year to October, which show a 31% contraction in both new vehicle sales and output for the 10-month period. Despite a traditional push by manufacturers towards the end of the year, BMI does not anticipate a major rally in the market, based on Taiwan's rising inflation and clamp down on credit. However, the industry's booming export business means that we do expect a recovery in the period to 2010, particularly in terms of production, though not to pre-2005 levels. Exports have continued to provide a lifeline for the Taiwanese industry, rising from just 832 units in the first 10 months of 2005, to 6,362 units in the year to October 2006. This takes the total past BMI's original forecast for the full year, which has now been revised to 7,634 units. The boost came from the commercial segment, which accounted for 97% of total automotive exports over the 10-month period. In terms of the future of commercial vehicle exports, much depends on continuing positive diplomatic relations with mainland China since many vehicle manufacturers see Taiwan as a strategic base for entering the Chinese market. BMI expects the mainland to see continued investment in infrastructure projects, creating demand in the commercial segment for both domestic players and importers.

Despite its export potential, Taiwan remains in 10th place in BMI's business environment ranking for the automotive industry in the Asia Pacific region, with its composite score falling by two points from the last report. This is largely due to a reduction in the market's completely built unit (CBU) output potential, following the drastic reduction in output in the year so far, which will have a knock-on effect for the rest of the forecast period.

The market's competitive landscape remains largely unchanged, with Kuozui, representative of Japan's Toyota, leading the market with a 32% share as of October 2006. However, the company's sales were down 28.6% year-on-year (y-o-y) and similar negative growth from other manufacturers has played no small part in keeping Kuozui in its dominant position. CMC (Mitsubishi), Yulon (Nissan) and Ford Lio Ho, in second, third and fourth place respectively, all registered declines of over 30%, which means BMI would expect Kuozui to retain market leadership at the end of the year.