Wed, Nov 20, 2019 - Page 8 News List

Southeast Asia is an option for automakers

By Yang Chung-hsin 楊宗新

Kazutoshi Mizuno, former chief design engineer for the Nissan GT-R sports car, has parted ways with Yulon Motor, five years after he was brought into the company by then-Yulon Group chairman Kenneth Yen (嚴凱泰).

Mizuno could never get the company’s flagship Luxgen line to hit its sales targets and the line has now sputtered to a disappointing standstill.

After this failure, many models being manufactured for the Chinese market were cut, and the group moved its operations to Miaoli County’s Sanyi Township (三義), in addition to initiating personnel cutbacks.

Yulon is Taiwan’s sole major vehicle brand, with a history stretching back even farther than Japan’s Honda Motor.

Compared with Honda, which long ago ventured into the international market, Yulon could never secure a firm foothold in the automobile manufacturing sector.

When the Luxgen line was launched in 2008, support for locally made products helped it steadily gain in market share.

To differentiate the brand in a competitive market, Yulon changed direction after Mizuno was brought on board, focusing on improving its horsepower and maneuverability to attract more buyers.

Unfortunately, it overlooked several aspects that many vehicle owners emphasize, such as taxes, availability, logistics and maintenance, and resale value.

With a poor economy and high gas prices, most consumers are more concerned with their pocketbooks.

This is why Japanese models, with their older designs, lower horsepower and suspect safety issues have continued to fare well, as they achieve greater fuel efficiency, rarely break down, and aftermarket parts and components are readily available.

Luxgen’s functions, maneuverability and extra horsepower were nice, but — in addition to the high price tag — many consumers thought these were more than what was needed.

Of course, luxury imported models have all of these, too, but they also have the cachet of an established name.

For Luxgen, which was relatively new and still demonstrated a few teething problems, it was too far of a stretch.

If the nation wants to have its own domestic vehicle brand, it needs to have a sizeable market to achieve economies of scale and lower production costs.

Australia has a larger population than Taiwan and, therefore, a higher number of vehicle owners. To encourage its auto manufacturing sector, the Australian government initially gave subsidies to Holden, which for many years operated by selling rebadged models from foreign manufacturers.

However, because of insufficient domestic demand and the failure to sell more than the cars marketed for the original manufacturer, Holden closed its last Australian factory in 2017.

If Luxgen wants to avoid a fate similar to Holden’s, it would not only need to tweak its manufacturing strategy, but also carefully consider in which international markets to offer its vehicles.

In the past, the company focused on the Chinese market, which had the advantage of proximity and a shared language.

However, Luxgen also encountered impediments, such as the Chinese government’s strict regulations on overseas investment, as well as price competition.

By comparison, Southeast Asia, with its fast economic growth and degree of trust in goods manufactured in Taiwan, should be considered a potential market.

Yang Chung-hsin is a researcher of China affairs.

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