A leading Taiwanese auto parts supplier is planning its first plant in the United States as it bets the demand for electric vehicles will continue to accelerate.
Hota Industrial Manufacturing – a key supplier to Ford, General Motors and Tesla – has established an aggressive expansion plan that includes building three new factories in its home market and more than tripling production capacity by 2025.
“We are expanding our production site in Chiayi [in southern Taiwan] this year and next year, and we also plan to build a factory in the United States in the years to come, ”Chairman David Shen told Nikkei Asia in an interview at the company’s headquarters in the Taiwanese city of Taichung. .
Founded in Taichung in 1966, Hota has made a name for itself manufacturing high-end gears and shafts for automakers in the United States and Europe. It joined the electric vehicle supply chain over ten years ago. Most of its production centers are in Taiwan, but it also has a factory in China’s Jiangsu Province.
It has been a Tesla supplier since 2012, supplying the US company with speed reducers, a key part of electric vehicle motors. Hota also supplies automotive transmission parts to Ford, GM, BMW, Mercedes-Benz, Volvo and McLaren.
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The company is currently planning a plant in the U.S. state of Texas amid a booming North American market for electric vehicles, Shen said. The plant would be Hota’s first production site outside of Asia.
That would join a number of compatriots who are building or planning to build facilities in the United States. Foxconn, the world’s largest contract electronics maker, said it would build electric cars for customers in North America. Taiwanese display maker Au Optronics, a supplier to Tesla, said it would “definitely” build or help build a factory in the country, while key iPhone assembler Pegatron, which also supplies Tesla, GM , Audi and Toyota, finalize plans to renovate their plant. in Texas to better serve automotive customers in North America, according to several sources. Taiwan’s Commercial Times first reported Pegatron’s plans.
“We will be launching a serious on-site selection in Texas in the second half of next year. . . If all plans come to fruition, our plant in the United States will be ready by the end of 2025 and start production in 2026, ”said Shen.
He added that the total investment could reach NT $ 8 billion (US $ 285 million) for a factory with the capacity to supply 1 million electric vehicles per year, although plans have not been finalized.
Hota is building a third factory in Chiayi and will begin building a fourth in the city from the second half of 2022, followed by a fifth factory there, Shen said. Aggressive expansion plans, he said, would help Hota move from supplying parts for 600,000 electric vehicles per year to 2m by 2025.
“We really see that traditional automakers are all changing. . . They are aggressively hiring new employees who have had experience with innovative new automotive players, such as Tesla, ”Shen said. “As an auto parts supplier with over 10 years of experience in the electric vehicle supply chain, every newcomer to the electric vehicle market is a new business opportunity for us.”
Shen expects at least 10 million new cars sold in 2025 to be electric. It also predicts “a golden cross” by 2030, when the volume of shipments of electric vehicles will exceed that of traditional cars.
As the global auto market was ravaged by the pandemic, dropping 14% in 2020, sales of electric vehicles rose 39% on the year to 3.1 million, although they only accounted for still only 5% of all new car sales last year, according to research firm Canalys. Electric vehicles are expected to exceed 5 million units – more than 7% of total new car sales worldwide – by 2021, the research company said, which would translate into annual growth of 66%.
But while the long-term outlook for the electric vehicle industry is optimistic, the world is currently grappling with an unprecedented chip and component shortage that has already hit automakers.
Hota is also affected by labor and material shortages, as well as skyrocketing shipping prices, Shen said.
“We did not renew work visas for some of our foreign workers on production lines last year when our customers drastically reduced orders as Covid-19 hit car demand,” he said. declared.
He said the sudden pick-up in demand made it difficult to hire enough workers on time, as quarantine restrictions hampered efforts to attract foreign workers and local labor was in high demand by the government. booming technological sector.
Steel, a key material for vehicle parts, is also in short supply as industries ranging from construction to electronics experience a post-pandemic recovery.
Meanwhile, the price of shipping containers to North America has quintupled since last year to over $ 10,000 each due to a rebound in demand across all sectors, adding to the complexity of logistics planning for Hota.
“If we are bidding for more shipping containers, we have to ask ourselves if we can really overcome all the shortages and make that many products on time. . . otherwise there could be [penalties] if we don’t fill the number of containers we have reserved, ”Shen said.
Shen said the steel shortage could be alleviated as early as this month, but added that labor and shipping issues could last until the second half of this year.
Still, he hopes the business can bounce back from last year, when lower demand hurt financial performance.
Hota’s 2020 revenue fell more than 12% to NT $ 5.21 billion, while net profit fell more than 55%. For the period January to March 2021, the company’s revenue jumped more than 11% from the previous year.
A version of this article was first published by Nikkei Asia on May 12, 2021. © 2021 Nikkei Inc. All rights reserved.