Chinese automakers have bought assets from the UK to Australia as they seek to challenge General Motors Corp and Toyota Motor Corp in the global market. Their next stop may be closer to home.
Taiwan’s biggest partsmaker, Tong Yang Industry Co (東陽實業) and TYC Brother Industrial Co (堤維西交通工業), ranked second, both said this week they were open to deals that may help boost sales in China, Asia’s biggest auto market. China’s push to develop more advanced cars and warming cross-strait ties may make that possible.
“It is a good idea to take over partsmakers in Taiwan,” said Yale Zhang (張豫), a consultant at CSM Asia in Shanghai. “Component-makers there have come up with outstanding technologies in many areas.”
Tong Yang and TYC Brother have both more than doubled in Taipei trading this year on speculation Chinese carmakers’ existing ties with Taiwanese suppliers may lead to direct investments. The nation’s auto industry will likely be one of the first opened to Chinese companies. SAIC Motor Corp (上汽集團), China’s biggest domestic automaker, and Geely Holding Group Co (吉利控股集團) have both previously bought assets overseas.
China wants “to buy industry leaders — the biggest and the best,” said Peter Tzeng (曾耀德), a Taipei-based Polaris Securities Co (寶來證券) analyst.
Tong Yang, the world’s biggest maker of replacement fenders, would consider approaches from Chinese investors, company spokeswoman Fancy Hsu (�?�) said. None has been received so far, she added. The company, which built its first Chinese factory in 1994, supplies automakers including Chery Automobile Co (奇瑞汽車), China’s biggest own-brand carmaker, and China FAW Group Corp (第一汽車集團).
TYC Brother would “welcome proposals from Chinese carmakers to buy a stake if the tie-up will help us expand in China and globally,” spokesman Hsia Kang (夏康) said.
Depo Auto Parts Industrial Co (帝寶工業), Taiwan’s No. 3 partsmaker by sales, would consider deals if any were offered, spokesman Cheng Anshun (鄭安順) said.
Tong Yang, which also makes body-parts and windshields, climbed 5.9 percent in Taipei trading to close at NT$34, its highest since Oct. 15, 2007. TYC Brother rose 2.3 percent to NT$22.55. Tong Yang is the second-best performer this year among the 45 companies in Bloomberg’s global partsmaker index.
Chinese carmakers can consider deals in Taiwan as the Chinese government announced the end of an investment ban on April 29. The same day, China Mobile Ltd (中國移動) said it had agreed to buy 12 percent of Far EasTone Telecommunications Co (遠傳), the first investment by a Chinese state-owned company in Taiwan since a civil war ended six decades ago.
Taiwan’s Cabinet is set to consider opening up 65 industries, including autos, to Chinese investors within two months, Fan Liang-tung (范良棟), executive secretary of the Ministry of Economic Affairs’ Investment Commission, said on Wednesday.
Chinese automakers are already building a presence in Taiwan, with Chery and Geely, the largest private automaker, both set to begin sales this year. An automakers’ group also sent an 83-member delegation to Taiwan last month to look at options, including cooperation in developing in-car navigation systems.
“We see a lot of opportunities for development in Taiwan,” said Jin Yibo (金弋波), a spokesman for Wuhu, China-based Chery. The automaker, which will offer A3 compacts in Taiwan from November, will source 60 percent of parts locally, he added.
Chinese automakers are interested in investing in overseas partsmakers as a lack of technology is hindering government plans to develop global players. At present, most of the carmakers are predominately assemblers for overseas automakers.
“What we need most is the core technologies, such as the capacity to design and make engines and gearboxes,” said Zeng Qinghong (曾慶洪), general manager of Guangzhou Automobile Group Co (廣州汽車工業集團), a Chinese partner of Toyota and Honda Motor Co.
The company will consider acquisitions at home and overseas, he added.
“Whether Chinese companies have the management skills needed for overseas investments is the question,” said Zhang Xin, a Guotai Junan Securities Co (國泰君安證券) analyst in Beijing. The small size of the partsmakers — Tong Yang has a market value of about US$440 million — may also limit the benefits of deals, he added.
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