Friday, Aug. 30. Hengshan Railway Station, a few stops out into the country from Hsinchu City. It's a little after nine o'clock in the morning, and a group of some 20 middle-aged men wearing polo shirts and baseball caps gets off the train.

At first glance they look like graying tourists on a summer outing. Their name cards, however, out them as an elite group of industry heavyweights and engineering experts. The party includes Tsai Ching-yan, chairman of the Industrial Technology Research Institute (ITRI); Delta Group Chief Technology Officer Thomas Li, Su Jau-ming, dean of the College of Management at Chung Hua University; and Lin Fu-ren, director of the Institute of Service Science at National Tsing-hua University. They have come out here to the countryside to test a Taiwan-built all-electric bus.

The bus, manufactured by RAC Electric Vehicle Inc. in Taoyuan County, climbs up to Dashanbei, a Hakka community at an altitude of some 700 meters. The road is narrow and winding, but the bus drives smoothly. After half an hour's drive, the group arrives at the Dashanbei Hakka Culture Museum.

Tsai Ching-yan watches the scenery outside the window with brightly shining eyes.

"Did you see that country house? That's my old family home. I go there on special holidays to make offerings," an excited Tsai tells his traveling companions.

A Homegrown All-Electric Bus

The high-profile visitors were participating in the test ride to find out whether the Taiwanese suppliers that presently supply parts and components to Tesla Motors could team up for a domestically produced electric vehicle.

Some 60 percent of the parts and components used in RAC buses are sourced in Taiwan, including motors from Fukuta Electric & Machinery Co. and drives and charging stations from Rich Electric Co.

It was Chang Chin-feng, chairman of Fukuta, who kept asking himself what would happen if Tesla Motors decided to no longer order from suppliers in Taiwan.

With assistance from the Automobile Research and Testing Center (ARTC), Fukuta Motor, Rich Electric, and transmission system maker Kuo Yuan Enterprise Co. Ltd. formed an alliance called EV Advanced Propulsion Driving System (EV-APDS). The alliance members transformed a Formosa Magnus (a Taiwanese sedan no longer produced) and an Opel sports car into fully electric vehicles and test-drove them on small side roads near Chang's factory.

Eric Chen, president and CEO of Rich Electric, even had a car accident in the process and needed six stitches on his eyebrow.

Their sweat and blood bore fruit – they created RAC's electric bus.

Raymond Tsai, who was born in 1937 and founded RAC at the advanced age of 70, says the reason he chose not to retire was the huge business opportunity he saw in the electric bus.

"Electric buses have four factors that are fixed: fixed locations, fixed routes, fixed time, and fixed passengers," Tsai explains. Thanks to the stable and steady usage of a bus, the inherent disadvantage of electric vehicles and the main reason for low consumer acceptance – insufficient range per charge – is not an issue.

The xEV Niche Market

The established large carmakers probably sneer at the idea of electric buses. But their lack of interest provides an opportunity for small companies to develop a niche profile.

On Aug. 22, when Typhoon Trami assaulted Taiwan, ITRI signed an international cooperation agreement with UK-based Smith Electric Vehicles, a manufacturer of electric vans and trucks, during the Taiwan Automotive International Forum and Exhibition 2013 at the Taipei International Convention Center.

"I keep saying Taiwan should not focus that much on sedans," remarks Dr. Jamie C. Hsu, management and engineering professor at Lawrence Technological University and advisor to Taiwan's Ministry of Economic Affairs. Hsu is a proponent of the "xEV," an umbrella term for all electric vehicle concepts, including hybrids, plug-in hybrids, and battery electric vehicles. His slide show presents an array of models, from two-person vehicles to long, slender three-wheeled racing cars, but none of them look like a conventional sedan.

Hsu believes that electric trucks are just the tip of the iceberg. Taiwan stands a chance of grabbing niche markets not yet on the radar of the big conventional automobile makers, thus creating unique all-electric means of transport, he posits.

James Wang, deputy general director of the Mechanical and Systems Research Laboratories at ITRI, also remarks that carmakers around the globe are vying to outdo Tesla Motors. By penetrating niche markets, Taiwan wins a good opportunity for building brands and fine-tuning technologies. In return, this could help Taiwanese manufacturers become part of the supply chain of international car brands.

Entering Philippines, Norway

Electric buses are one way of putting the xEV concept into practice. Aside from RAC, EV manufacturer Pihsiang Machinery MFG. Co. Ltd. and EV battery maker Advanced Lithium Electrochemistry Co. Ltd. (Aleees) are eager to grab the domestic market for electric buses. Rich Electric Chairman Chang Sheng-shih explains that his company concentrates on lithium iron phosphate cathode materials. While the energy density of such batteries is low, their life cycle is long, which makes them a suitable option for repeated use in off-vehicle charging systems with exchangeable batteries.

Currently, Rich Electric has the highest market share, with 44 electric buses in service. The company has even attracted well-heeled domestic and foreign investors such as Taiwanese conglomerate Ruentex Group and the Israeli firm Giza Venture Capital.

Some large Taiwanese companies have also entered the fray.

Teco Group, which started out as an industrial motor manufacturer, is targeting the Philippine market with electric-powered crop transporters and auto rickshaws.

The Philippine Department of Energy has published a call for tender for the replacement of 3,000 auto rickshaws with electric models. Banking on its longtime experience as a motor manufacturer, Teco has submitted a tender for the deal.

George Lien, TECO Group senior vice president in charge of new business development, explains that the company's strategy is to "shoot ten thousand arrows at once" trying to become a parts and components supplier to the large automakers, while at the same time exploring niche markets for specialty vehicles.

Delta Electronics, for its part, has introduced EV charging stations in Norway, a country with great temperature variations. There the charging stations will have to stand the test of harsh weather conditions.

Chang Yu-ming, general manager of Delta Electronics' Charging and Microgrid Solutions Business Unit, acknowledges that so far electric vehicles do not even account for 1 percent of company revenue. But he believes that the 1 percent mark can be topped within two years.

Taiwan's Competitive Strengths and Weaknesses

In the electric vehicle market, Taiwan faces a substantial weakness in that its parts and components makers lack experience in building entire vehicles from scratch. Therefore, making it into the supply chain of large automakers is bound to be a challenge.

Kuo-hsiu David Huang, chair of the Department of Vehicle Engineering at National Taipei University of Technology, also points out that with regard to battery technology Taiwan is not there yet. As a result, even the domestically produced RAC buses need to be equipped with imported batteries from China. The success of Tesla Motors is owed precisely to their groundbreaking battery technology.

Yet Taiwan is not without competitive advantages. Azizi Tucker, who formerly worked for Tesla Motors as senior supplier quality engineer in Asia Supplier Development, remarks that Taiwan "has technology, talents, knowledge, and a manufacturing industry infrastructure." Walking his talk, Tucker demonstrated his confidence in Taiwan's EV potential by taking residence in Taiwan, moving to Taishan District in New Taipei City. His Taiwanese business partner of more than 20 years, racing car aficionado Chiang Chia-jen, provided NT$10 million in start-up capital. The pair will start out developing electric bicycles, but hope to eventually build a made-in-Taiwan all-electric racing car.

Hunting for the necessary parts and components, they were able to find virtually everything they needed in the northern half of the island. Following some training, a university dropout at the neighboring factory designed a complicated exhaust pipe. Tucker therefore believes that Taiwan has certain advantages that the United States does not have:

"Elon Musk was not qualified to make the car either. He didn't have the background, but just tried!" Tucker notes. "So many people are afraid to try, they have the knowledge, but not the imagination," the engineer observes, urging the Taiwanese to muster the courage to think big.

Translated from the Chinese by Susanne Ganz