Tesla supplier Hota plans U.S. expansion as demand for electric vehicles grows
TAICHUNG, Taiwan – A major Taiwanese auto parts supplier is considering 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 also 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 have a plan to build a factory in the United States in the coming years, ”President David Shen told Nikkei Asia in an interview at the company 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.
The Taiwanese company has been a supplier to Tesla since 2012, supplying the US company with speed reducers, a key part of EV motors. Hota also supplies automotive transmission parts to Ford, General Motors, BMW, Mercedes-Benz, Volvo and McLaren.
The company is now 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.
He 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, General Motors, Audi and Toyota, finalize its renovation plans. factory in Texas to better serve automotive customers in North America, according to multiple 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, ”Shen said. mentionned.
The president added that the total investment could reach 8 billion New Taiwan dollars ($ 286 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 start building a fourth in the city from the second half of 2022, followed by a fifth factory there, the president said. The aggressive expansion plans, he said, will help Hota move from supplying parts for 600,000 electric vehicles per year to 2 million by 2025.
“We really see that traditional automakers are all changing. (…) They are aggressively hiring new employees who have had experience with new innovative 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.
“Every newcomer to the EV market is a new business opportunity for us.”
David Shen, President of Hota
As the global auto market was ravaged by the pandemic, down 14% in 2020, sales of electric vehicles rose 39% year-on-year to 3.1 million, although they were still only 5 % of all new car sales last year, according to the research company. Canalys. Electric vehicles are expected to exceed 5 million units – more than 7% of total new car sales worldwide – by 2021, according to the research firm’s forecast, 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 didn’t renew work visas for some of our foreign workers on production lines last year when our customers drastically cut orders as COVID-19 hit auto demand,” Shen said.
The president 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 booming technology 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 … if not, there might be [penalties] if we don’t fill the number of containers we’ve 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, the president is hopeful that the company 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 from January to March 2021, the company saw its revenues increase by more than 11% compared to the previous year.