Price hikes loom in local auto industry

The nation's automakers may raise car prices next year to reflect increased costs after the government announced that tax breaks for the use of local parts would expire at end of this year, industry insiders said yesterday.

As part of a strategy to encourage the nation's carmakers to stay and develop their business in Taiwan, the government had offered tax breaks ranging from 3 percent to 9 percent to automakers using chassis, bodies and engines designed or developed locally.

Following Taiwan's accession to the World Trade Organization (WTO) in Jan. 1, 2002, the country was given a three-year grace period to revoke the tax breaks. The concession will be abolished at the end of the year, when the grace period expires. As a result, automakers face increases of at least NT$400 million or NT$500 million in tax expenditure, according to a report in the Chinese-language media.

"We do not rule out the possibility of hiking car prices as a result of the increased cost of between 3 percent to 5 percent," Yulon Nissan Co (裕隆日產汽車) spokesman Wu Hsin-fa (吳新發) said.

Yulon, the nation's fourth-largest car vendor, manufactures and distributes cars under the Nissan brand name. It sold 66,203 cars last year, giving it a market share of 17.98 percent, according to figures compiled by the Taiwan Transportation Vehicle Manufacturers' Association (車輛工業同業公會).

Wu said the company would try to absorb the added cost before resorting to price hikes in a bid to avoid losing its competitive edge.

Yulon is expected to sell 70,000 cars this year.

The termination of the preferential tax scheme would impact on the nation's auto industry, China Motor Corp (中華汽車) said, but declined to speculate on what the exact financial impact to the company would be.

China Motor Corp, the nation's No. 2 carmaker, distributed 87,708 Mitsubishi cars last year, with a target of 90,000 units for this year.

"We hope the government could provide research and development subsidies in other forms to sustain the growth of the industry," China Motor's spokesman Hsu Li-min (許利民) said.

Wu agreed that the industry might not be able to afford the required investment in R&D and talent development without governmental support.

"The government should set aside some resources and shift its focus from the electronics industry to the hard-working traditional manufacturing industry, which has responded to its wish to stay in Taiwan," Wu said.

The industry earlier this week petitioned the Industry Development Bureau under the Ministry of Economic Affairs to follow the example set by Australia and allot a certain amount of funds every year to subsidize research and development.

The bureau said in response yesterday that the industry would go back under the regulations of the Statute for Upgrading Industries (促進產業升級條例), which offers general incentives, including tax cuts for investment in research and development.