TALKING POINTS FOR FOREIGN INVESTMENT
Analysis of Automobile Industry
I. Investment niche
The reasons for oversea companies to invest in the transport vehicle industry of Taiwan
A. In this country, the production value of the vehicle industry comprises about 95% of that of the transport industry.
B. The monetary value of vehicles and vehicle parts made in this country in 2005 was about NT$ 536 billion.
C. The development of the auto industry has been focused on autotronics, environmental conservation and globalization. The major auto companies in Taiwan have been aiming at the development of autotronics related products and services, hybrid vehicles and global logistics.
II. Market Status & Scope Analysis
The domestic automobile market of Taiwan
A. Assembled automobile market
From January to October in 2005, about 450,000 automobiles were sold in Taiwan; 360,000 of which were passenger cars, and domestically made passenger cars accounted for 312, 000 of these sales. Furthermore, 86.7% of all automobiles sold in Taiwan were domestically made (please see Fig. 1 and Table 1).
Data sources: Industrial Production Statistics Monthly of the Ministry of Economic Affairs and ITIS, IEK/ITRI (Dec. of 2005)
Fig.1: The market shares of the five types of automobiles in domestic auto market of this country
Table 1: The market shares of the top five automotive makers in Taiwan in 2005
Domestic Brand / Market ShareKuozoi Motors, Ltd. / 30.1%
China Motor Corpoation / 19.8%
Yulon Motor / 14.8%
Ford Lio Ho Motor Company / 12.6%
Honda / 5.2%
Concentration Ratio / 82.5%
Data source: ITIS, IEK/ITRI (Dec. of 2005)
B. Automotive parts and motorcycle parts
In 2005, the monetary value of the automotive and motorcycle parts exported from Taiwan declined by 1.01%; in addition, the monetary value of the automotive and motorcycle parts exported from Taiwan to the top 10 export countries saw a decline of 16.23%. Among the top ten export destination countries for parts exports from Taiwan, the United Arab Emirates saw the largest drop of 25.44%, while Italy saw a drop of 14.47%. Simultaneously however, parts exported to South Africa experienced a healthy growth of 30.61%. The top three export destination countries for parts from Taiwan were the US (ranking the top), China (ranking the second) and Japan (ranking the third) (please refer to Table 2 and Table 3).
Table 2: the export values of vehicle parts exported from this country to the top 10 export destiny countries from Jan. to Aug. of 2005 (units: NT$ 1,000 and %)
Country / Export value / As percent / 05/04Growth rateThe US / 33,717,409 / 36.82 / 3.02
China / 6,467,602 / 7.06 / -7.89
Japan / 5,442,246 / 5.94 / 3.95
Canada / 2,617,363 / 2.85 / 7.47
Germany / 2,581,632 / 2.81 / 2.43
UK / 2,560,160 / 2.79 / 3.36
Australia / 1,822,185 / 1.99 / -12.55
Italy / 1,759,433 / 1.92 / -14.47
South Africa / 1,745,167 / 1.90 / 30.61
United Arab Emirates / 1,387,933 / 1.51 / -25.44
Subtotal / 60,101,130 / 65.59 / -16.23
Total / 91,568,449 / 100.00 / -1.01
Data sources: Statistical Database of the Customs, ROC; ITIS Project of IEK Center of ITRI (Dec. of 2005)
Table 3: the top 10 companies in terms of auto and motorcycle parts exported from this country to North America from 1996 to 2005
Ranking / 1999 / 2000 / 2001 / 2002 / 2003 / 2004 / Jan. to Aug. of 20051 / TYC Brother / TYC Brother / Cheng Shin Tire / Cheng Shin Tire / Cheng Shin Tire / TYC Brother / TYC Brother
2 / Tong Yang Group / Tong Yang Group / Tong Yang Group / Taiwan Kal Yih / Tong Yang Group / DEPO Auto Parts / DEPO Auto Parts
3 / Taiwan Kal Yih / Cheng Shin Tire / Taiwan Kal Yih / DEPO Auto Parts / DEPO Auto Parts / Tong Yang Group / Nankang Rubber Tire
4 / Unipoint Electric / Taiwan Kal Yih / Auto Parts Industrial / Tong Yang Group / Taiwan Kal Yih / Cheng Shin Tire / Taiwan Kal Yih
5 / Cheng Shin Tire / DEPO Auto Parts / DEPO Auto Parts / Auto Parts Industrial / Auto Parts Industrial / Auto Parts Industrial / Auto Parts Industrial
6 / Gordon / Unipoint Electric / Gordon / Gordon / Federal Corp. / Taiwan Kal Yih / Tong Yang Group
7 / Kenda / Kenda / Unipoint Electric / Kenda / Gordon / Gordon / Eagle Eyes
8 / Apex Auto Parts / Gordon / Kenda / Unipoint Electric / Unipoint Electric / Eagle Eyes / Federal Corp.
9 / Auto Parts Industrial / Kung Long Batteries / Kung Long Batteries / Apex Auto Parts / Honjig Tech Machine / Federal Corp. / Cheng Shin Tire
10 / DEPO Auto Parts / Apex Auto Parts / Apex Auto Parts / Eagle Eyes / Eagle Eyes / Gordon
Data sources: Statistical Database of the Customs, ROC; ITIS Project of IEK Center of ITRI (Oct. of 2005)
C. Revenues and profit margins of automobile companies in Taiwan in 2004
Publicly listed or OTC companies in the Taiwanese transport vehicle industry can be categorized into five sub-sectors: assembled automobile sub-sector, auto parts sub-sector, auto service sub-sector, tire sub-sector and bicycle sub-sector. Please see Table 4 and Table 5. The rapid development of the transport vehicle industry has spurred growth in sales and spare parts. Several large parts manufacturers (such as Tong Yang, Kenmos Technology and TYC Brother Industrial Co.) have established a global business strategy. Additionally, the Tong Yang Group (including Tong Yang, Taiwan Kal Yih Industrial Co., Kai Ming, Ru Yan, Tung Yan Chemical, and Tong Yang-Mitsuboshi Co.) has established operations centers in Europe, China, India and Taiwan; Kal Yih also produces additional products (such as refrigerators, rearview mirrors and cooling fan motors). In the tire trade, Maxxis has successfully entered the global tire market and become a well-known brand name. Giant is well established as a leader in the bicycle trade and sells three types of bicycles (Giant, X-Net and G&P) to China, with each type targeting a different market. Giant intends to put more efforts into product innovation.
Table 4: Revenues and profit margins of publicly listed automobile companies in Taiwan in 2004
Company / Income / Growth in income / Pre-tax profit / After-tax profit / EPS / Profit rate in 2003 / Profit rate in 2004Yue Loong / 8.01 / 1.37 / 0.08 / 0.24 / 0.23 / 24.13 / 24.55
CMC / 40.48 / 33.86 / 2.28 / 1.72 / 0.98 / 17.29 / 16.05
SYM / 39.54 / 36.95 / 3.11 / 3.05 / 4.00 / 18.94 / 18.31
Ho Tai / 66.67 / 10.93 / 4.60 / 4.48 / 2.08 / 22.91 / 23.55
Tong Yang Group / 48.33 / 23.01 / 6.18 / 5.53 / 3.52 / 16.99 / 18.27
Shinlin Electric / 25.66 / 58.32 / 2.65 / 2.17 / 1.68 / 21.92 / 25.56
Right Way Industry / 15.40 / 41.27 / 1.98 / 1.73 / 3.45 / 17.07 / 16.58
Jui Li / 17.42 / 5.5 / 2.33 / 2.18 / 0.23 / 28.33 / 28.76
Kenmos Technology / 15.44 / 56.40 / 1.22 / 1.04 / 1.45 / 32.25 / 31.77
TYC Brother Industrial Co. / 19.99 / 2.49 / 2.19 / 1.99 / 3.69 / 27.13 / 25.99
Kal Yih Indistrial / 23.65 / 0.21 / 10.2 / 7.98 / 3.38 / 77.86 / 79.17
Gordon Auto Body Parts Co. / 66.76 / 34.55 / 8.61 / 9.03 / 3.47 / 23.83 / 30.50
Kian Shen Co / 39.14 / 3.92 / 7.76 / 6.26 / 2.10 / 28.73 / 28.37
Mobiletron Electronics Co. / 135.99 / 20.89 / 24.74 / 22.85 / 2.18 / 23.80 / 23.53
HOTA / 32.64 / 9.19 / 6.37 / 5.96 / 1.51 / 20.66 / 18.48
Taiwan Calsonic Co / 22.99 / 21.83 / 0.64 / 0.61 / 0.60 / 13.96 / 10.95
Taiwan Acceptance Co / 52.40 / 17.42 / 5.76 / 4.24 / 2.01 / 9.03 / 10.33
Nankang Rubber Tire Corp. / 88.08 / 27.94 / 12.01 / 11.40 / 4.07 / 14.81 / 14.93
Tai Feng / 8.01 / 1.37 / 0.08 / 0.24 / 0.23 / 24.13 / 24.55
Cheng Shin / 40.48 / 33.86 / 2.28 / 1.72 / 0.98 / 17.29 / 16.05
Kenda / 39.54 / 36.95 / 3.11 / 3.05 / 4.00 / 18.94 / 18.31
Aidiya / 66.67 / 10.93 / 4.60 / 4.48 / 2.08 / 22.91 / 23.55
Merida / 48.33 / 23.01 / 6.18 / 5.53 / 3.52 / 16.99 / 18.27
Giant / 25.66 / 58.32 / 2.65 / 2.17 / 1.68 / 21.92 / 25.56
Data sources: M.O.P.S. and ITIS, IEK/ITRI (Oct. of 2005)
Data sources: Client and ITIS, IEK/ITRI (Oct. of 2005)
Fig. 2: a chart illustrating EPSs of the publicly listed of automobile companies in Taiwan in 2004
III. Competition Analysis
An analysis on the competitiveness
According to a study done by IEK Center, with regard to the vehicle parts supply chain, this country is superior to Southeast Asia, Eastern Europe and China in the aspects of quality, production system and after-sales service/maintenance system; on the other hand, this country is less competitive in the aspect of price as compared to Southeast Asian countries, Eastern Europe and China (please see Fig. 3).
Data source: ITIS, IEK/ITRI (Oct. of 2005)
Fig. 3: a diagram illustrating the competitiveness of the vehicle parts supply chain of this country
IV. Production Cost
A、 Land rent Cost
a. Rents at the Hsinchu Science-based Industrial Park
Table 2 Land rent at the Hsinchu Science-based Industrial Park:
Unit: NT$
Category / Area (m2) / Rent (per month)Land / Over 2,000 / NT$ 49/ m2
Standard plant / First floor / 531.3~1280.4 / NT$ 122/ m2
Second floor / 531.3~1227.6 / NT$ 115/ m2
Third floor / 662.97~1346.4 / NT$ 106/ m2
Fourth floor / 662.97~798.6 / NT$ 99/ m2
Deluxe plant / 1485 / NT$ 204~325/ m2
Incubation center / 80
160
240 / NT$ 184/ m2
Dormitories / Single room / 15~18 / NT$2,250~2,950/unit
Double room / 15~21 / NT$1,850~3,300/unit
Family home / 100~290 / NT$10,550~33,300/unit
Note: The above rents are adjusted on the basis of announced rents for the current year.
b Rents in the Tainan Science-based Industrial Park
Land and plant buildings within the Tainan Science-based Industrial Park are leased, and will not be sold. The government will set and adjust rents on the basis of amortized cost at the time of development and subsequent yearly changes in real estate and land value taxes. Rents within the Tainan Science-based Industrial Park will consequently be lower than those outside the park. Land shall be leased for periods of 20 years, and plants leased for periods of one year. The following rents are currently charged:
Units: NT$
Category / Term / Rent (m2/month)Land / 20 years / 12.9
Plants / 1 year / 103~120
Note: Land rents will be adjusted on the basis of announced land prices, public facility development costs, and laws and regulations.
B、 Labor Cost
Table 3 Average monthly wages for workers in different industries in Taiwan
Unit: NT$
Year / Ave. 2001 / Ave. 2002 / Ave. 2003Mining and quarrying / 44,264 / 45,006 / 47,263
Manufacturing / 38,586 / 38,565 / 39,583
Electricity, gas & water / 93,091 / 89,591 / 91,034
Construction / 37,746 / 36,848 / 37,219
Trade / 39,760 / 39,202 / 39,799
Accommodation & eating-drinking places / 25,991 / 25,828 / 25,181
Transportation, storage & communication / 53,350 / 51,564 / 51,396
Finance & insurance / 62,625 / 65,767 / 64,693
Real estate& rental & leasing / 42,604 / 40,714 / 39,872
Professional, scientific & technical services / 53,191 / 49,587 / 50,990
Health care services / 54,701 / 54,115 / 55,999
Cultural,, sporting & recreational services / 41,242 / 39,489 / 40,861
Other servies / 31,157 / 30,525 / 30,057
Source: Monthly Bulletin of Earnings and Productivity Statistics and Annual Report of Earnings and Productivity Statistics published by the Directorate-General of Budget, Accounting and Statistics, Executive Yuan, Jan. 2004
V. Taxation
Table 4 Individual Consolidated Income Tax Rates
Units: NT$
Net consolidated income / Tax rate / Progressivedifferential / Tax payable
0—370,000 / x / 6% / – / 0 / =
370,001—990,000 / x / 13% / – / 25,900 / =
990,001—1,980,000 / x / 21% / – / 105,100 / =
1,980,001—3,720,000 / x / 30% / – / 283,300 / =
3,270,001–– / x / 40% / – / 655,300 / =
Table 5 Profit–Seeking Enterprise Income Tax Rates
Taxable income (P) bracket / Tax rate / Progressive differential / Quick formulaLess than NT$50,000 / 0 / –
Less than NT$100,000 / 15% / None / 1. When P is less than NT$71,428: T= (P–50,000x1/2
2. When P is greater than NT$71,428: T=Px0.15
Over NT$100,000 / 25% / 10,000 / T=Px0.25–NT$10,000
Note: T is the amount of tax.
VI. Investment Incentives
A、 Preferential Taxes
The ROC Government enacted the Statute for Upgrading Industries in 1991 to develop a favorable environment for foreign and overseas Chinese investors in Taiwan and to encourage investment by foreign companies for the purpose of upgrading the ROC’s industrial base. On January 1, 2000, the statute was amended to extend preferential tax measures for another 10 years until December 31, 2009. These measures are detailed in the chart below:
Incentive Measure / Nature of Incentive /Accelerated depreciation of equipment and facilities / Equipment and facilities used exclusively for R&D, experimentation, and quality control purposes, and equipment, machinery, and facilities that are utilized for energy conservation or that use new and clean energy, are eligible for an accelerated depreciation period of two years. If there is any residual post-depreciation service life remaining following the accelerated depreciation period, depreciation may be continued for one or several years within the service life of the assets as specified in the Income Tax Law until the assets are fully depreciated.
Investment in automation equipment or technology / Companies may deduct 5% to 20% of the amount of investment in these areas from their profit-seeking-enterprise income tax over a five-year period beginning with the year in which the investment is incurred.
Investment in recycling and pollution control equipment or technology