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Taiwan PTW Makers Are Between a Rock and a Hard Place
2007/10/29
Motor scooter and powered two wheeler (PTW) makers in Taiwan have been hard at work for the past two decades, one reason for which is the urgent need to upgrade its industrial sophistication and prowess, especially in light of the underselling tactics used by rivals in developing and emerging nations. The efforts are paying off apparently as both governmental and private sectors see justification to continue investing more resources in the industry.
 | | James Wang, director of the Intelligent Mobility Technology Division of the MSL under ITRI. |
Certain signs prove that Taiwan`s motor scooter and PTW sectors have not been toiling in vain. The island is now one of the most important global production bases that turn out sub-150cc scooters for Yamaha and Suzuki. Taiwan became a few years ago the largest producer of all terrain vehicle (ATV) products and now supplies some 50% to 60% of the global demand. Well-known motor scooter brands in Taiwan such as KYMCO, SYM, TGB have successfully ridden onto the international stage. And increasingly more local PTW makers are actively trying to increase engine displacements to upgrade product range.
On the other hand, Taiwan faces potentially bottom-line-upsetting hurdles. The majority of Taiwan`s PTW suppliers are facing a double whammy-competition from both the top and bottom segments of the industry. The top-four Japanese PTW brands have been aggressively developing, promoting high-end, upscale products with constant technical-upgrading that can leave Taiwan counterparts out of breath; while the bottom-feeders from emerging and developing nations, especially mainland China, hold absolute advantages in cost and economies of scale often achieved by massive domestic markets.
So it is sink or swim for Taiwan makers of motorcycle, scooter, and ATV products. They have no choice but to find market niches in the near future or be rolled over by one or both the competitors from the high and low ends of the industry.
Playing Engine Doctor
James Wang, director of the Intelligent Mobility Technology Division of the Mechanical & System Research Laboratories (MSL), a unit of the government-backed Industrial Technology Research Institute, or ITRI, says that Taiwan already has built a reputable global image with its PTW and ATV products; but urges local manufacturers to focus on enlarging engine displacements to over 500cc, which would expand product range, sophistication and distinguish its market position.
 | | The engine is a core platform of powersports products. |
Wang leads a team of about 200 seasoned professionals at the MSL, a powerhouse in Taiwan`s vehicular industry that helps local makers play increasingly important roles globally. The MSL has a major report card to show: It helped to develop a first series of 100% homegrown automotive engines displacing 1,200cc, 1,600cc, 2,000cc, 2,200cc, 2,200cc with turbochargers, etc.; a series of fully-homemade motorcycle, scooter and ATV engines displacing 250cc, 400cc, 500cc, 600cc and 700cc; a variety of propulsion solutions such as hybrid automotive engines, electric scooters, and many more.
"The engine is the core technology in the powersports line," Wang points out, "regardless of motorcycles, scooters, mopeds, ATVs, go-karts, personal watercrafts, snowmobiles, outboard engines, lawn mowers, etc." Powersports products generally include any recreational vehicle driven by a motor, such as dune buggies, go-karts, motorbikes, snowmobiles, personal watercrafts, etc.
But developing small-displacement powersports engines is no longer viable for Taiwan companies, Wang furthers, because the costs on the island are too high for global competition. However the island currently is still a major supplier of sub-150cc scooters for leading brands such as Yamaha and Suzuki. "The problem is not qualitative but cost-related," he explains.
According to Wang, the lower-margin small-displacement powersports products now need economy of scale in production, while local manufacture is a must to cut costs. One excellent example, according to him, is the annual sales volume of small-engine lawn mowers, which totals some four million to five million in the U.S. and Europe; but no supplier can compete in the lower-margin segment without local production, regardless of engine quality.
Another example, Wang adds, is that MSL once helped local companies develop an excellent 26cc, two-stroke lawn-mower engine. But the project fizzled out because small- to medium-sized enterprises (SMEs) in Taiwan do not have sufficient capital to set up economically-scaled production in the targeted U.S. market, nor did have locally-famous brands stateside.
MSL`s Role
Compared with major, specialized PTW and ATV makers, Wang points out, MSL might know less about the market because seasoned professionals in the laboratories have to stay informed with and engage in the whole spectrum of vehicular equipment rather than only powersport-related sectors. "But we are more knowledgeable about cutting-edge technologies, materials, solutions for the automotive market."
"MSL has been playing a supporting role to local PTW makers," Wang says, "we have been trying to utilize our know-how and accumulated experience in automotive engines to upgrade local PTW-engine market. For example, MSL developed the island`s first 400cc PTW engine several years ago by applying the most advanced electronic fuel-injection (EFI) technology, making the power unit more powerful and fuel-inefficient. Playing a part to develop variable valve timing (VVT) technology is another example. In addition, our strong R&D capacity also props up major PTW makers aspiring to build a wide-ranging product line within the minimal period but without sufficient R&D talents."
Basically, Wang further explains, the tough part about developing engines is not displacement-based but related to performance targets. One example is a compact engine for a racing motorcycle that has to run up to 14,000 rpm (revolutions per minute), which come with cooling, wear-resistant issues. A tamer example is a scooter engine that has to run at relatively lower rpms, since higher revolutions result in noise levels unsuitable for street applications.
"However, one definite trend is that global consumers are going to be increasingly more demanding of PTW engines-asking for more power, reliability, energy-efficiency, and better green technologies, especially in light of the apparent predicaments forecasted by the greenhouse effect advocates. In short, the successful engines of the future will have to outdo their predecessors."
No matter how the automotive and PTW industries evolve, Wang stresses, the internal combustion engine will remain the heart of vehicular powertrains, as well as the linchpin of success for global suppliers.
The Bigger the Better
A homogenous characteristic for all four of the world`s top and most successful motorcycle brands-Yamaha, Suzuki, Kawasaki, and Honda-Wang says that their major profit-makers are the heavyweights or 400cc and larger bikes, not the sub-125cc models.
 | | The micro or mini car may be a way for local PTW makers to upgrade themselves. (Sketch courtesy of Marabese Design of Italy). |
"The success of heavy-duty powersports products hinges on brand image and value," the director points out. "Taiwan companies wanting to be world-class players or are aware of survival pressure must look to building bigger-displacement items, as staying "small" limits their future even if they may be the world`s best in such sector. In fact, remaining exclusively in the small-displacement segment does not differentiate them from their mainland Chinese rivals, which compromises their corporate image."
Taiwan PTW makers have optimized their adaptability and considerable manufacturing prowess, Wang continues, by fitting well-developed sub-150cc scooter engines to ATVs-hence playing a significant role to meet the demands of youths in the segment.
Overcoming Underselling Rivals
"The more demand for bigger displacement engines, the less likely local ATV makers can resort to off-the-shelf parts to build upscale products. I think Taiwan PTW and ATV makers must attempt to develop 500cc or bigger products in the near future as a way to circumvent underselling from competitors, often a counter-productive selling tactic, and set up global branding for sustainable operations."
The suppliers with sizable engine platforms or capacities, the expert adds, should bet on not one target market but many so as to achieve economy of scale for cost-efficiency.
Those local PTW suppliers with well-developed powertrains and manufacturing capacities as well as differentiated global markets, Wang points out, should find one or few niche product lines that can compete globally, even against Japanese brands.
"Taiwan companies cannot outdo the top four Japanese brands in product diversity," Wang says, so the solution is to find market niches as specializations, which is not giving up their bread and butter-the existing motorcycle or scooter lines."
One example is the Kwang Yang Motor Co., Ltd. (KYMCO), which has set up global brands in major markets, especially in Europe, and surpassed many global competitors to become a formidable player worldwide, without challenging Japan`s top-four however. "KYMCO could one day rival the major Japanese players once it becomes a leader in global niche markets," he says.
Feasible Options
"Another option for ambitious Taiwan suppliers is find new application markets to which they may utilize established strengths," Wang says, "such as the rapidly growing utility vehicle (UTV, or side-by-side), big-bore utility ATV, and mini-car segments."
The four-wheeled vehicle market is a good prospect, or essential path for some PTW makers with considerable R&D and manufacturing capacities in Taiwan, Wang says. The mini or micro car, for example, he explains, is a way to enhance product added-value to existing products. But for carmakers, such small-scaled vehicles, despite requiring similar parts, assembly time, labor force, etc., fetch prices much lower than luxury sedans`. So mini or micro cars would be value-added products for PTW makers, but resource-wasting for automakers.
"MSL has clearly positioned itself as a technical partner, not a competitor, for local PTW manufacturers," Wang claims. "We have a broader view of the vehicular equipment line, accumulated technology strengths, and significant innovation ability, which are achieved by a team of industry analysts devoted to market and product surveys. Our goal is to find new ways and innovate products to drive the development of the local PTW sector."
(by Quincy Liang)
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