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The shift from traditional internal combustion engine cars to cars powered by electric and other types of new energy has become mainstream. Changes in automotive technologies and performance have driven the growth in demand for electrification technologies and related hardware and software, and upturned the closed structure of the automobile industry. In the transformation in the automobile industry, traditional automobile companies, ICT companies, and startups need partners for joint investment in the development of components or systems. Taiwan's automotive components industry and ICT industry have become important members of the global supply chain for electric auto makers in recent years. They will become the optimal partners for foreign investors for exploring business opportunities for next-generation automobiles.

Advantage for New Generation Automobiles

  • Complete automotive industry supply chain

  • Suitable testing environment for self-driving vehicle

  • Extensive experience with information security technologies

  • Taiwan is densely populated and the road traffic is a complex mix of various forms of mobility. With a population accustomed to the use of ICT products in everyday life, Taiwan is also well-suited to become a demonstration site for the development of next-generation automobiles. In addition, the promulgation of the "Unmanned Vehicles Technology Innovative Experimentation Act" has created conditions that are even more conducive to the creation of autonomous vehicle test environments. This will make it easier for foreign firms to come to Taiwan to engage in product development and testing.

  • The US-China trade war is still heating up, and the US government is extremely sensitive about cybersecurity issues. Taiwan, which is strong in cybersecurity technologies and very experienced in defending against cyber attacks, is very suitable as a partner in the development of next-generation automobiles and testing sites.

  • A very wide swath of industry is involved in next-generation automobiles. For both electric vehicles and autonomous vehicles, there are new types of technology where breakthroughs are still needed. The ICT industry of Taiwan boasts world-class R&D capability and manufacturing expertise. Its many years of experiences in the automotive electronics industry have created a variety of applications for vehicle safety, mobility assistance, communications multimedia, and automotive IC. It can serve as a partner for international automobile manufacturers for the development of next-generation vehicles.

  • Auto makers in Taiwan are already capable of independent manufacturing of finished electric vehicles. And beyond that, Taiwan's auto makers have relatively flexible production lines and can provide comprehensive manufacturing services for special auto models that are produced in small batches. As such, they could be good partners for big-name international auto makers during the pilot production phase.

  • Taiwanese auto makers are high-level producers of auto components, and have strong technologies for the production of EV lithium batteries, drive motors, reduction gears, power storage systems, power control modules, power control systems, and telematics. In the future, as the technologies needed for new generation automobiles continue to be developed, Taiwanese makers of components will be able to rely on their superior R&D capabilities to continue providing products to big-name international auto makers.

  • Due to the impact of the pandemic, the dispersed distribution of production bases will become a predominant trend moving forward. In the future, Taiwan could serve as one of various regional supply centers for big-name international auto makers. Foreign firms can make good use of the existing foundation that's been laid by Taiwanese ICT firms and makers of auto components. They can also diversify their supply chain risks by setting up a Taiwan-centered regional production network that serves as a backup production base or supply source for important components.

Focus of Policy

  • Autonomous vehicles
    The government is using advanced driver assistance systems (ADAS) as the basis for legislative amendments designed to improve traffic safety.

  • Self-driving vehicles
    Legal basis: Taiwan's national legislature in 2018 passed the "Unmanned Vehicles Technology Innovative Experimentation Act." Drawing upon the "regulatory sandbox" spirit, this act provides a statutory basis for loosely regulated experimental efforts to develop new types of unmanned vehicle technologies.
    Testing sites: They include the Taiwan CAR Lab in Shalun, Tainan for testing vehicles such as mid-sized buses or smaller. Hutoushan Innovation Hub in Taoyuan City uses the Internet of Vehicles (IoV) & Smart Driving Center and Information Security IoT Center to test autonomous vehicles under a wide variety of simulated environments.

Tax Incentives

  • The profit-seeking enterprise income tax rate is 20%.
  • Up to 15% of the company's R&D expenditures may be deducted from its profit-seeking enterprise income tax for current year; or up to 10% of such expenditures may be credited over three years against the profit-seeking enterprise income tax payable by the company.
  • Royalty payments to foreign companies for imported new production technologies or products that use patents, copyrights, or other special rights owned by foreign companies is, with the approval of the Industrial Development Bureau, MOEA, exempt from the corporate income tax.
  • Imported machinery which local manufacturers cannot produce are eligible for duty-free treatment.
  • Investment in smart machinery/5G: For investments of no less than NT$1 million and no more than NT$1 billion, either "5% of investment spending deducted from profit-seeking enterprise income tax (current FY)" or "3% of investment spending deducted from profit-seeking enterprise income tax, if total spending spread over three years" may be selected, but the total amount deducted may not exceed 30% of corporate income tax that year. The applicable period is expected to be extended to December 31, 2024.
  • A company employee who has obtained stock compensation worth a combined total of less than NT$5 million and continuously held the stock while remaining in the company's employ for at least two years may choose to be taxed on the market price of the stock at either the time the stock was obtained or the time the stock is sold, whichever is lower.
  • Foreign special professionals who meet criteria are eligible for a 50% deduction of total income tax for amounts exceeding NT$3 million.
  • Companies that set up operations in export processing zones, science industrial parks, or free trade ports are eligible for exemptions on import duties, commodity tax, and business tax for the import of machinery and equipment, ingredients, fuel, materials, and semi-finished products for their own use.
  • Companies that use undistributed earnings to engage in substantive investments may exclude the amount when calculating their profit-seeking enterprise income tax.

Research and Development Subsidies



Success Stories

Production and Technologies
  • Toyota Tsusho has acquired a stake in FUKUTA Electric & Machinery, and the two entities plan to cooperate in developing motors for electric vehicles and plug-in hybrid vehicles (PHV). Kuozui Motors, which builds Toyotas under license for the domestic market, recently invested NT$6 billion to upgrade its production lines to begin turning out hybrid vehicles.
  • Denso, a big Japanese automotive components manufacturer, took an equity stake in Cryomax Cooling System, which mainly produced auto radiators under the Cryomax brand and exported them as aftermarket products to Europe and North America.
Cross-industry Collaboration

In November 2019, Sumitomo Corporation invested in RAC Electric Vehicles, spending NT$126 million to obtain a 7% equity stake. Sumitomo will rely on RAC to perform electric bus manufacturing and related services, while RAC will rely on Sumitomo's marketing and services network to expand its international markets.

R&D and Testing Facilities

NVIDIA, a US maker of graphics chips, has signed a letter of intent to engage in cooperation with the National Applied Research Laboratories (NARLabs), which is subordinate to Taiwan's Ministry of Science and Technology. NVIDIA will take part in efforts to develop Taiwan's autonomous vehicle industry, and will cooperate with Taiwan CAR Lab on technology applications. In addition, Canadian auto parts maker Magna, has already had an R&D center in Taiwan for several years where the company has been working to develop ultrasonic sensors, parking/reverse assist systems, automotive imaging, and forward camera modules and systems. And now Magna is drawing up plans for an additional investment to engage in further R&D work on new technologies.

Talent Development

The Volkswagen Group Taiwan Training Academy that was established in Xizhi District of New Taipei City is Volkswagen's biggest training institution anywhere in Asia outside of mainland China. Recently, in order to embark upon Taiwan's electric vehicle market, Volkswagen established the "e-Mobility Center" to train professionals with special expertise in maintenance of Taiwan-made electric vehicles, and to engage in cooperation with Delta Electronics, Inc. on the development of EV charging infrastructure. In addition, Honda Taiwan is cooperating with technical and vocational schools in Pingtung County to train technicians and provide young graduates with employment opportunities.


Source: InvesTaiwan


Key Innovative Industries in Taiwan - Next-Generation Vehicle (9.00MB)