Yulon Motor Co (
Yulon Vice Chairman Kenneth Yen (
In addition, the Taiwanese carmaker has plans to enter related markets, such as car loans, insurance, rentals and used-auto sales. The company said it hopes to generate NT$100 billion in annual revenue from these business lines by 2005, up from NT$17 billion today.
PHOTO: GEORGE TSORNG, TAIPEI TIMES
Nissan Motors presently owns 25 percent of Yulon.
Although local media has said Yulon may buy a 75 percent stake in the Philippine plant, the company yesterday refused to confirm those reports, but added the investment will allow it to take over the plant in January.
"The stake purchase is a part of our plans to raise Yulon's international presence. The investment will make the Philippines Yulon's first overseas base," Yen said, adding that the NT$1 billion stake is the first stage of its investment.
Because the Philippines is an ASEAN member, Yulon's investment will help the firm sell cars to the group's member countries, Yen said, and possibly boost car sales from just 500,000 units in Taiwan to eventually five million units in a broader market of Taiwan, China and Southeast Asia.
All ASEAN members are subject to an Asian Free Trade Agreement (AFTA) that in 2003 will eliminate tariffs on cars traded among ASEAN members. Presently, the tariff rate is 5 percent.
In addition to the Philippines, ASEAN members include Thailand, Indonesia, Vietnam, Cambodia, Brunei, Singapore, Malaysia, Laos and Burma.
If the company reaches its sales goal, annual revenue could almost triple from NT$70 billion today to NT$200 billion in 2005.
When asked about how Yulon will secure the required NT$1 billion in capital, the company said the sum will come from its own coffers.
In addition, Yulon said it would use its investment to pay off losses of nearly 200 million pesos the Philippines plant registered last year
In 1997, Nissan didn't anticipate the brewing financial storm and in April of that year constructed its Philippine factory with annual production capacity of 36,000 units.
Then the financial storm hit, prompting a hike in interest rates, thus deteriorating the plant's financial books.
"We plan to start up our business with zero debt," said Horng Bao-yann (
"Except financial structure, the plant is in good shape in terms of production and distribution now," Horng said, adding that the plant recently cut personnel from 700 to 500, thus reducing production costs significantly.
In order to rev up sales, Yulon plans to introduce Nissan's Cefiro and Sentra models to the Philippine market in January and March, respectively, and set up two new companies there to manage research and development, logistics and sales.
"At the latest, we can break even in 2002 by selling 20,000 units a year there," Horng said, although he added that his break-even estimate was conservative as the company could probably write its books in black ink when production hits 10,000 units a year.
Nissan sold 7,000 cars in the Philippines last year, accounting for a 10 percent market share.
But some market analysts are skeptical of Yulon's plan, as the Philippine new car market has been shrinking. Sales dropped from 150,000 units in 1996 to 80,000 units in 1997 and 70,000 units this year.
Wen-Rong Tsay (
Detailed information about the plant's profitability will be available when financial statements are released later.
A local analyst said Yulon's Philippine investment would deal a serious blow to the local car industry if Yulon begins importing cars from the Philip-pines. The analyst said the cars, manufactured at a lower cost, would prove competitive.
When asked if Yulon would begin importing cars, Horng said, "Yes, we will probably do so."
The analyst also said the local car industry should be concerned about Yulon's moves into the car loan, insurance, rental, repair and used-car sales markets.
According to Yulon, these sectors generated an accumulated NT$28 billion in Taiwan last year, higher than NT$25 billion in the new car market. Given the great market potential, Yulon plans to give priority to these markets in its plans for the next century.
Since the Yulon Group, including Yulon Motors and China Motors (
Despite its ambitious plans for the future, Yulon appears to have driven down a bumpy road this year. In August, the company cut its full-year pretax profit forecast by one-fifth to NT$4.2 billion (US$132 million) from the prior target. For the first nine months of this year, Yulon earned NT$3.54 billion, or NT$2.26 a share, down from NT$5.05 billion, or NT$3.55 a share recorded last year for the same period. Moreover, revenue was NT$36.59 billion, down from NT$43.36 billion last year.
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