Mon, Feb 09, 2004 page10

• China set to lift Taiwan car makers

  ON THE ROAD Sales in Taiwan are expected to remain flat, but car makers are hoping their units in China will make a killing as demand there increases

  • By Lisa Wang / STAFF REPORTER
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  Taiwanese automakers Yulon Motor Co (裕隆汽車) and China Motor Corp (中華汽車) are expected to enjoy another bumper year this year as earnings from Chinese ventures make up a larger slice of their income, industry watchers said yesterday.

  Vehicle sales in Taiwan last year surpassed car distributor forecasts of 410,000 units to reach 413,000 cars. That helped Yulon and China Motor hit their annual earnings targets ahead of schedule.

  Local car makers expect the growth momentum to carry into this year as the economy improves.

  "This time the driving force will come from their Chinese car-making ventures instead of the home market, which will have only lukewarm growth like most mature markets in the world," said Liu Che-wei (劉哲維), an auto industry analyst at Polaris Securities Group (寶來證券).

  rising car sales

  He forecast that domestic car sales would rise nearly 2 percent this year to 420,000 vehicles, compared to growth of between 10 percent and 20 percent in China, the world's fastest-growing market.

  As a result, Taiwanese car makers will see their Chinese businesses account for a bigger share of their total earnings this year, he said.

  Yulon Motor, the manufacturing arm of the Yulon group, will earn NT$7.35 billion, or NT$4.29 per share, this year, Liu forecast.

  The prediction excludes proceeds from a scheduled share sale of Yulon Nissan Co (裕隆日產) -- a reseller unit that was spun off in a restructuring in October and a now run as a joint venture with Japan's Nissan Motor Co -- during the second half of this year.

  Half of Yulon's earnings will come from its non-operating income from Yulon Nissan thanks to large-scale capacity expansion in its Chinese car manufacturing venture, Fengshen Automotive Co (風神汽車), Liu said.

  Fengshen Automotive, in which Yulon Nissan owns a 40 percent stake, is expected to increase its vehicle sales to 80,000 cars this year from 60,000 last year, Yulon Group chairman Kenneth Yan (嚴凱泰) said.

  Last year, non-operating income accounted for a third of total earnings, said Yulon Nissan spokesman Wu Hsin-fa (吳新發), who used to be a top executive at Yulon Motor before the company's shake-up.

  Another analyst agreed with Liu. The new Yulon Motor will benefit from Fengshen Automotive's capacity increase by posting after-tax earnings of NT$5.8 a share this year, according to Jeff Chang (張世澤), an analyst at Yuanta Core Pacific Securities (元大京華).

  Commercial carmaker China Motor is expected to book bigger profits from its Chinese investment this year than Yulon Motor, as the capacity expansion of its Chinese venture, Southeast Motor Co (東南汽車), will be faster than Fengshen Automotive, Chang said.

  Southeast Motor hopes to boost its vehicle output to about 150,000 cars this year from 80,000 cars last year, which will help push up China Motor's earnings to around NT$6 a share, from NT$5.84 a share last year, Chang predicted.

  China Motor shares rose by 4.5 percent to NT$69 on the TAIEX on Friday. Yulon Motor shares remained unchanged at NT$45.4.
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