How the automotive industry seizes business opportunities in the government's green energy policy

劉宸志 Kenny Liu 2023-05-17

Policy often plays a key role in industrial development. In a previous article, I mentioned that the government's green energy policy, initiating subsidies for the purchase of electric buses in urban areas in hope of electrifying all city buses in Taiwan by 2030, has made a solid impact on the electric bus industry in Taiwan. For example, in addition to gaining business opportunities in Taiwan's public transportation market by increasing self-production rates and technical capabilities, bus manufacturer Master Transportation has been working tirelessly to consolidate its presence in overseas markets. I also mentioned in the same article that batteries have up to 20,000 charge cycles, a hallmark that will lead to huge business opportunities for energy storage facilities. Specifically, after setting up a new GWh-grade LTO battery plant in Zhongli, now Taiwan's local battery manufacturer GUS Technology is getting ready to compete for new business opportunities brought by the green energy policy.

To help readers better understand the impact of the green energy policy on the future of auto-related industries in Taiwan, I have sorted through the strategies and practices of relevant government agencies, published by the National Development Council on March 30, 2022, in response to the UN's 2050 carbon neutrality target, and the sections related to the automotive industry are listed below. It is hoped that industry participants will be able to grasp the once-in-a-lifetime opportunities arising from the green energy policy pertaining to the prospects of the next three decades and place themselves and their companies in a better strategic position with operational advantages to face up to the future competition in the industry.

  1. All city buses will be electric by 2030, and the subsidies for new diesel city buses were withdrawn on December 31, 2022. Subsidies are provided through special programs for bus operators to purchase electric buses, batteries, and charging equipment.
  2. The DMIT (Designed and Made in Taiwan) program for smart electric buses is promoted, encouraging manufacturers to apply for the Industry Upgrade and Innovation Platform program to invest in the independent development of technologies for electric buses and key components. Efforts are made to establish DRTS (demand responsive transit service) verified by intelligent self-driving highways and create an environment ideal for intelligent highway services.
  3. A demonstration project will be promoted for hydrogen vehicles, with priority given to the development of hydrogen fuel cell buses. The 2030 full electrification of buses (passenger buses) project is divided into two phases for effective and efficient implementation:

Demonstration (2023-2026): accumulate experiences, take inventory, and build infrastructure while reviewing the industrial environment.

Promotion (2027-2030): anticipate the maturation of HFCV technology, determine a product list, expand the scale of operation, continue to build infrastructure, and support the localization of key industries.

  1. Electric passenger cars will account for 30% (35% for electric scooters) and 60% (70% for electric scooters) of total passenger car sales by 2030 and 2035, respectively, and all new passenger cars and scooters sold will be electric by 2040.
  2. Electric government vehicles are promoted, and all government vehicles will be electric by 2030. Subsidies are provided for the purchase of electric cabs, and subsidies or incentives are available to the general public for the purchase of locally produced EVs in order to nurture localized industries by giving priority to their opportunities to develop and thrive.
  3. The demonstration grant program will guide the localization of the development and rooting of key components for large passenger vehicles. The government will propose incentives for the development of the EV industry and deliberate the provision of subsidies for local production of smart EVs and R&D of key EV components to accelerate the development and production of domestic EV products.
  4. The bar is raised higher for the energy efficiency of new vehicles, and the standards for vehicle CO2 emissions will be tightened gradually, including passenger cars, pickups, motorcycles, etc., to promote the introduction of vehicles high in energy efficiency and low in carbon emissions. Relevant regulations for safety inspection of various vehicle types will be amended, a greenhouse gas emissions disclosure system will be built, and the number of gasoline vehicles auto manufacturers and importers may submit for inspection each year will be specified, along with the greenhouse gas emission efficiency standards that should be met.
  5. Gasoline cars will be phased out and replaced with EVs or hybrids. Carbon certificates can be issued in 2024 at the earliest, and trading platforms will be available. As for carbon certificates for motorcycles, only gasoline motorcycles leaving the factory before June 30, 2007 can be replaced with electric motorcycles and receive the certificate. In addition to the basic purchase price of NT$1,000 offered by the EPA for a motorcycle carbon certificate, the Hsinchu Science Park Administration and the Hsinchu County Environmental Protection Bureau have proposed NT$1,500 and NT$2,000 respectively this year.
  6. The government will guide operators in the commercial sector step by step to replace general vehicles with EVs, electric forklifts, and other electric equipment through counseling, incentives or subsidies to boost the electrification of commercial vehicles.
  7. There will be electricity tariff plans exclusively for EVs, providing EVs with suitable tariff options. A single-window application mechanism will be established for the distribution of electrical grids in charging facilities to facilitate the installation of charging piles.
  8. Companies are encouraged to promote the transformation of maintenance and repair technicians, including those who work on buses, the transformation of expertise of auto mechanics and auto inspectors, and the transformation of motorcycle shops to drive roads free of gasoline vehicles forward at full throttle.

In my previous article, I briefly explained that the subsidies provided by the policy for 100% urban electric buses by 2030 could be up to NT$3.7 million per vehicle purchased, and that urban buses and general intercity buses would be looking at a maximum subsidy of $1.6 million per vehicle in the subsequent operation. The amount of subsidy is about 50% of the price of a large electric bus, and the actual cost borne by bus operators is close to the current price of a diesel bus. Starting this year, the government no longer subsidizes the purchase of diesel buses, so the 12,000 city buses that must be replaced with electric buses by 2030 will be a treasure trove for companies that have been committed to electric buses in Taiwan such as RAC Electric Vehicles and Master Transportation. Such companies will be able to ensure growing sales all the way to 2030. The picture is also rosy for operators of tour buses, long-distance buses, and medium-sized buses with 15-25 passenger seats, as they will benefit from new opportunities thanks to the butterfly effect.

Taking the propitious policy into account, Master Transportation invested in a new factory in Erlin Park in Changhua a while ago to increase production capacity. The new 6,200-ping (approx. 5 acres) RAC and Mobiletron plant in Taichung Port officially started mass production in the third quarter of 2022. The production capacity will include 1,700 electric buses and 7,000 sets of chassis, electric powertrain, battery, and battery management system during the first phase, making the plant the most advanced intelligentized electric bus production base in Asia. President Tsai Ing-wen accompanied the President of Guatemala, Alejandro Giammattei, and his delegation to visit the plant in Taichung on the 26th of last month as part of their visit to Taiwan. President Tsai specifically pointed out, "RAC, providing one-stop services, is a benchmark for innovative services. Guatemala has just passed the electric transportation bill, and electric buses made in Taiwan are in trial operation there as we speak. Next, we will continue to bolster cooperation between the two countries to expand the market for Taiwan's EV industry." Moreover, the two electric bus manufacturers, RAC and Master Transportation, are taking a proactive approach to getting orders from overseas markets, and their efforts in markets such as Japan, Singapore and India should be able to yield better results in three years for people in Taiwan to see.

Then there is the plan to achieve 100% electric government vehicles by 2030. Last September, the Executive Yuan planned a budget of NT$83.8 billion to subsidize 500,000 electric motorcycles, 500 electric cabs, and the R&D of 70 electric wheelchair accessible vehicles for general purposes. The Ministry of Economic Affairs will incentivize auto manufacturers to develop electric pickups by means of subsidization in the following two years, hoping to prompt domestic auto OEMs to invest in two new logistics vehicle models, including building prototypes, system integration, testing and validation, advise domestic auto manufacturers on investing in the development and production of whole EVs, and promote a total of 57,800 domestic EVs. The Directorate General of Budget, Accounting and Statistics, Executive Yuan will loosen the regulations on the purchase of government vehicles, lifting the current cap of $1.3 million to allow for the purchase of an EV that costs $1.5 to $1.7 million. To achieve the goal of 100% electric government vehicles, the government has set key performance indicators for 2030 to actively track and assess results. Likewise, the butterfly effect will be working here, increasing business opportunities in various fields. One example is the demonstration of electric transport, including the electric scooter rentals in Orchid Island and the electric vehicles (public transport, shared vehicles, or scooters) in remote areas. Also, Chunghwa Post's 9,000 postal motorcycles will be fully electrified, and delivery platform operators will need assistance in encouraging delivery staff to use electric scooters. These are all great opportunities for businesses that buckle down first to grow and multiply profits.

The above 11 actions and measures manifest the close correlation between the development of the automotive industry and the government's green energy policy. I believe that automotive businesses that choose a few areas they specialize in from the listed areas to invest resources in deep plowing will be able to reap a bumper crop in time.

About the author - Kenny Liu

Graduated from Dept. of Aeronautics and Astronautics, Cheng Kung University in 1988, started his auto industry career since July 1990 after two year military service. Starting as a service engineer and a temp technician, product marketing specialist in Peugeot/ Daihatsu, marketing and dealer channel specialist in VW LCV from March 1992, then field manager in GM Taiwan from Feb. 1994, sales and service / parts head in Ford Lio-Ho from Sep. 1998 till retirement in May 2019. Kenny then started to work for JLR Taiwan as sales/service head and consultant/ lecturer. After that, he was invited to work at a Suzuki dealer of Taipei as the general manager until April 2022.