Yulon gains from China expansion

Yulon Group (裕隆集團) will double its annual revenue this year from a year ago to nearly NT$300 billion due to its greater presence in China, the world's fatest-growing automobile market, a company executive said yesterday.

"[With the expansion in China] Yulon Group's revenue will jump to nearly NT$300 billion this year following the completion of a spin-off plan this month," said Kenneth Yan (嚴凱泰), vice chairman of Yulon Motor Co (裕隆汽車).

Yulon announced in late May its plan to divide itself into two separate entities. Under the company's organizational restructuring plan, Yulon this month formally split into Yulon Motor, which will continue engaging in original equipment manufacturing, and Yulon Nissan Co (裕隆日產), a new joint-venture 40 percent owned by Nissan Motor Co.

The Yulon Nissan Co will take part in all investment projects in China together with Nissan, as well as all Nissan-car related business in the greater China region, a partnership that is expected to help Yulon gain over its rivals.

"We'll join Nissan's expansion efforts in China by providing car-design, developing and producing capabilities," Yan said during a speech at Yulon Motor's 50th anniversary ceremony.

"Expanding in China is unavoidable," Yan said.

Yulon Nissan is expected to produce a total of 550,000 vehicles in 2006 and 900,000 vehicles by 2009 thorough its Chinese unit Fengshen Automotive Co (風神汽車), according to Yan.

Fengshen, a three-way investment between Yulon Nissan, Nissan and China's Dongfeng Motor Corp (東風汽車), is expected to double its production next year to 120,000 cars, which is equal to Yulon Motor's annual production this year.

Compared with limited growth in Taiwan, China's automobile market is expected to jump by 10 percent to 20 percent annually in the foreseeable future, said Han Chen-ping (韓正平), a senior vice president of Yulon Motor.

As for China Motor Corp (中華汽車), another subsidiary of Yulon Group, the automaker will manufacture about 230,000 vehicles in 2005 through Southeast Motor Corp (東南汽車), a 50-50 joint venture with Fujian Automotive Industry Corp (福建省汽車工業集團), Yan predicted. The production will continue to grow to 550,000 cars a year in 2008, he added.

Southeast Motor's sales of 500 million Chinese yuan (about NT$2 billion) constituted about one-third of China Motor's total sales of NT$6 billion during the first nine months this year, according to Yulon.

In terms of earnings, Yulon Nissan spokesman Wu Hsin-fa (吳新發) said profits generated from China investment are expected to reach NT$3 billion, about 27.8 percent of Yulon's total earnings of NT$10.8 billion this year.

The good news, however, did not move the Yulon Motor's and China Motor's shares yesterday. Yulon Motor shares dropped by 0.72 percent to end at NT$41.50 each, while China Motor shares remained unchanged on the TAIEX.