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A leading Taiwanese automotive parts supplier is planning its first US plant as it bets demand for electric vehicles will continue to accelerate.
Hota Industrial Manufacturing — a key supplier to Ford, General Motors and Tesla — has set out 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 and next year, and we also have a plan to build a plant in the US in the coming years,†chair 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 made its name making high-end gears and shafts for auto companies across the US and Europe. It joined the electric vehicle supply chain more than a decade ago. Most of its production hubs are in Taiwan but it also has a factory in the Chinese province of Jiangsu.
It has been a supplier to Tesla since 2012, providing the US company with gear 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 now planning a factory in the US state of Texas amid a booming market in North America for electric vehicles, Shen said. The plant would be Hota’s first production site outside Asia.
It would be joining a number of compatriots building or planning to build facilities in the US. Foxconn, the world’s biggest contract electronics manufacturer, said it would build electric cars for customers in North America. Taiwan’s display maker Au Optronics, a Tesla supplier, said it would “definitely†build or help build a plant in the country, while key iPhone assembler Pegatron, which also supplies Tesla, GM, Audi and Toyota, is finalising plans to renovate its plant in Texas to better serve auto clients in North America, multiple sources said. Taiwan’s Commercial Times first reported Pegatron’s plans.
“We will kick off a serious evaluation on-site selection in Texas in the second half of next year . . . If all the plans materialise, our plant in the US will be ready by late 2025 and start production in 2026,†Shen said.
He added that total investment could be up to NT$8bn (US$285m) for a plant with the capacity to supply 1m electric vehicles a year, though the plans have not been finalised.
Hota is building a third factory in Chiayi and will start to construct a fourth in the city from the second half of 2022, followed by a fifth plant there, Shen said. The aggressive expansion plans, he said, would help Hota go from supplying parts for 600,000 electric vehicles a year to 2m by 2025.
“We really see traditional carmakers are all changing . . . They are aggressively hiring new staff who have had experience with innovative new car players, such as Tesla,†Shen said. “As an automotive parts supplier that has more than 10 years of experience in the EV supply chain, every newcomer into the EV market is a new business opportunity for us.â€
Shen expects that at least 10m new cars sold in 2025 will be electric. He also predicts “a golden crossover†by 2030, when the shipment volume of electric vehicles will overtake that of traditional cars.
While the global automobile market was savaged by the pandemic, dropping 14 per cent in 2020, sales of electric vehicles grew 39 per cent on the year to 3.1m, though they still accounted for just 5 per cent of all new car sales last year, according to research company Canalys. Electric vehicles are forecast to exceed 5m units — more than 7 per cent of total new car sales worldwide — in 2021, the research company said, which would translate to 66 per cent annual growth.
But while the long-term outlook for the electric vehicle industry is rosy, the world is currently battling an unprecedented chip and component shortage, which has already hit automakers.
Hota is also affected by shortages of labour and materials, as well as surging prices for maritime shipping, Shen said.
“We did not renew working visas for some of our foreign production line workers last year when our clients were drastically reducing orders as Covid-19 hit auto demand,†he said.
He said the sudden recovery in demand made it challenging to hire enough workers in time, as quarantine restrictions hindered efforts to bring in foreign workers and local labour was in high demand from the booming tech sector.
Steel, a key material for vehicle parts, is also in short supply as industries ranging from construction to electronics go through a post-pandemic recovery.
Meanwhile, the price for North America-bound marine shipping containers has surged fivefold since last year to more than $10,000 each due to a rebound in demand across industries, adding to the complexity of logistics planning for Hota.
“If we bid for more shipping containers, we have to consider if we really can overcome all the shortages and make that many products in time . . . otherwise there could be [penalties] if we do not fill the number of containers we booked,†Shen said.
Shen said the shortage of steel could be alleviated as soon as this month, but added that labour and shipping issues could last until the second half of this year.
Nevertheless, he hopes the company can rebound from last year, when plunging demand hit financial performance.
Hota’s 2020 revenue dropped more than 12 per cent to NT$5.21bn, while net profit declined more than 55 per cent. For the 2021 January-March period, the company’s revenue jumped more than 11 per cent 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.
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