For years, Heda Industrial has produced gears, shafts and other auto parts in Taiwan and supplied them to major automakers such as Tesla, Ford Motor and General Motors. But soaring shipping costs and geopolitical factors during the pandemic have forced some of the company's customers to reassess their reliance on Taiwan. In order to address customers' concerns about supply chain security and to close the distance with North America (North America accounts for 70% of its sales), Heda Industrial announced in September 2023 that it would invest US$99 million to build a factory in New Mexico, which is the company's first factory outside Asia.
Heda Industrial CEO Shen Qianci said in early November: "It is actually a very natural decision for us to choose the United States. But in terms of cost, it is not very natural. This is why we have chosen not to leave Taiwan for so many years."
During the pandemic, China and large industries have resorted to expensive air freight to ship heavy-duty auto parts to North America amid a shortage of shipping containers and port workers. Shen Qianci said: "During the epidemic, even if your product is cheaper, you cannot ship it. But now everyone can accept, 'If you are closer to me, I am willing to spend more money.'"
It is reported that Heda Industrial's New Mexico factory will start construction in early 2024 and start large-scale production in 2025. The company chose New Mexico because of its lower costs compared to other states and its proximity to customers in the U.S. and Mexico. Currently, both the United States and Mexico are accelerating the construction of electric vehicle supply chains.
Shen Qianci said: "In the first few years of the factory's operation, U.S. production will account for 5-8% of the company's total production. New Mexico will provide $3 million in funding, plus potential tax credits."
Although it is more expensive for Heda Industrial to set up factories in the United States, Shen Qianci pointed to the company's advantages in scale, vertical integration and expertise. In addition, Shen Qianci said: "The U.S. inflation reduction bill will also help alleviate cost pressures, as the U.S. government encourages electric vehicle manufacturers to purchase parts domestically."