Automotive supply chains in Taiwan and China are seeing limited financial growth during the off-season in July and August. However, as inventory destocking ends, new energy vehicle (NEV) sales in China and other major markets show promising potential. Internal combustion engine (ICE) sales in Europe and the US have signaled a recovery. The development of fuel-cell vehicles has also been expedited.
Most automotive parts suppliers said the third quarter of 2024 would not be an off-season. Taiwan-based aftermarket (AM) suppliers like the Tong Yang Group and TYC Brother Industrial have announced they would put more effort into the NEV sector, which is expected to be the focus of the automotive components industry in 2H24.
As for ICEs, sources say many tier-1 suppliers or critical assembly plants still have to destock high-level inventory after the global car market's recovery in 2023. In China, the accumulating inventory was caused by increasing NEV demand replacing ICE's. The clearance is seeing progress come 2H24.
Most suppliers say they were slightly optimistic about the third quarter's outlook since ICEs continue to drive sales in European and US markets. Tier-1 suppliers also maintain their order pull-ins.
Companies say that while many countries have set a deadline for ICE vehicle sales, consumers are hesitant to purchase EVs due to charging infrastructure, range anxiety, and safety concerns.
However, part suppliers who have long operated in China say the country is expected to boost order pull-ins in 2H24 because the Chinese government has been promoting NEVs in rural areas.
Nonetheless, signs of market saturation have emerged in the Chinese NEV market, with a price war looming. How much demand the government policy can stimulate and for how long is still uncertain.
Hybrid EVs gaining traction
From the perspective of the end market worldwide, suppliers say BloombergNEF data showed that the EV markets of China, India, and France are growing, while those in Germany, Italy, and the US are not.
According to the American Automobile Association's (AAA) survey this year, about 18% of consumers say they would consider buying an EV, compared to 23% in 2023. In contrast, more people showed their interest in hybrid EVs. About one-third said they would likely buy one.
As international tier-1 suppliers continue to develop fuel-cell vehicles, Taiwan-based companies have delivered parts and samples and developed their own solutions. Although the hard work will not be paid off until after 2024, projects are underway.
In addition to the market rebound in battery EVs, hybrid EV and fuel-cell EV sales are rising. In the future, multiple NEVs, including BEVs, will become crucial zero-emission products.
Taiwanese AM suppliers will be essential in the ICE and NEV segments. TYC founder Chun-Chi Wu said the company will shift toward lighting systems, electric control, and in-vehicle lighting that EVs need. Tong Yang's president Yung-Hsiang Wu also says the company has invested in three NEV-dedicated factories in China to grow its OEM business. The plant in Changchun is slated to begin production in Q1 2025.
