Luxury sedans would seem a risky bet in a time of global economic strife, but Yulon Motor Co (裕隆汽車) believes it has found the right formula: Its car is cheap and it is destined for China.
Yulon’s Luxgen model boasts global positioning, night vision and blind-spot cameras — and at NT$800,000 (US$25,000), the company hopes it will appeal to tech-savvy but only moderately wealthy Chinese consumers.
“Many of the functions can only be found on luxury sedans worth up to five times as much,” Hu Kai-chang (胡開昌), president of Yulon Group subsidiary Luxgen Motor Co (納智捷汽車), said in an interview.
Yulon put the finishing touches to the Luxgen — coined from the words “luxury” and “genius” — last year, when the car market worldwide was deep in the doldrums.
“Looking back, we’ll find that we couldn’t have picked a better time than last year to recruit the talent and buy the equipment we need,” Hu said.
“If we had postponed the launch of the brand, it would have cost a whole lot more money,” he said.
Yulon was founded in 1953 as the Taiwanese government pursued ambitions to create a home-grown auto industry. That goal was scaled down over the decades and now Yulon is best known for producing Nissan cars in Taiwan on license.
The Luxgen project, started more than four years ago, has cost Yulon about NT$15 billion, but it says the gamble is already paying off.
The first Luxgen — a 2.2-liter minivan for family use — was unveiled in Taiwan last September and since then Yulon has received orders from more than 3,000 local motorists.
In a market where monthly sales of people-carriers are a meager 300 units, the response has been encouraging.
Buyers say they like its high-tech system, developed jointly with Taipei-based HTC Corp (宏達電), one of the country’s leading smartphone suppliers.
Last month, Yulon saw its sales grow 59.5 percent year-on-year to NT$2.96 billion, the highest monthly figure in three years. But Taiwan, with its population of 23 million, offers limited opportunities, which is why Yulon is looking to the billion-plus Chinese market.
Cross-strait trade has rocketed since Taiwan relaxed a decades-old ban on civilian contacts with China in 1987.
And with sales topping 13 million units last year, China has replaced the US as the world’s biggest auto market.
“It’s unlikely the Luxgen would turn a profit if its sales were confined to Taiwan,” said Kevin Tsui (崔毓雄), an analyst with SinoPac Securities (永豐金證券). “The local market is too small to support the development of a local brand.”
The Luxgen series for the Chinese market may be produced at a plant in Zhejiang Province, a joint venture with Dongfeng Automobile Co (東風汽車) that is awaiting the green light from the Beijing government.
“The odds of success are 50 percent,” Tsui said. “However, if [Yulon] did not do it this way, it would have no chance of surviving in today’s extremely competitive market.”
Yulon has already invested in a joint venture with a Chinese automaker and Daimler to make Mercedes vans in the southeastern province of Fujian.
Meanwhile, Yulon’s smaller local rival, Sanyang Industry (三陽工業), controls 25 percent of Xiamen King Long (廈門金龍), a Chinese bus maker.
However, Taiwan’s carmakers, unlike their German, US, Japanese and South Korean rivals, have failed to build a major role in the Chinese market because of their lack of proprietary technology.
This marks Yulon’s most ambitious foray since 1986, when it launched another model based on its own technology, a series of cars called “Feiling.”
But the Feiling project failed because it could not match the cutting-edge auto technology of the day.
“Yulon learned a lot from the painful lesson. The success of Luxgen, at least initially, has built on that experience,” said Toreo Lin, editor-in-chief of Taipei-based Auto Graphic magazine.