Why are there so many scooters in Taiwan?
I recently finished my summer internship at AppWorks in Taipei and loved every minute of it. I met some genuinely good people, formed what I hope will be lifelong friendships, and learned an incredible amount from the best, who were always willing to teach. To everyone I met this summer who is reading this, please know you will always have a special place in my heart and I do hope we will meet again. But before I leave to go back to the US to finish my MBA, I had to find out about something very distinctive about Taiwan: What’s with all the scooters?
I still remember the first time I came to Taipei last summer. I stepped out of Taipei Main Station that night and easily the first thing I noticed was the roar of the many scooters on the streets. The scooters and their collective vroom against the backdrop of the Taipei night lights was so distinctive because you normally associate ubiquitous scooters with dusty, developing Southeast Asian countries, not a developed country like Taiwan.
I dug into the numbers a bit and it turns out Taiwan, a country of 23 million people, has the highest scooter density in the world by far and, as I suspected, is a bit unusual in that it has a higher per capita GDP than its peers at the top of the scooter density list:
Meanwhile, Taiwan punches a bit below its weight in automobiles per capita:
So what’s the deal — why do so many people ride scooters in Taiwan? Like many things in life, I think we can break it down into several reasons revolving around cost and convenience:
- It’s cheap and easy to get around. I was surprised to learn from my scootering co-workers that the cost of the gasoline they use to get to work is less than what it would cost to use public transportation like MRT or bus. The scooter itself will set you back $2,000–3,000 and you can use it over 7–10 years. All in all, a pretty good deal for quick, door-to-door commuting. (I feel pretty bad now because the first car I bought was $17,000, weighed 1300 kg, and only had one person in it 95% of the time.) In Taiwanese cities outside of Taipei, the public transportation is not as good so the scooter advantage is even sharper.
- There is excellent scooter infrastructure. Parking spots are plentiful and marked, and the roads and intersection design have accounted for scooters.
- Taiwan has scooter-friendly geography. Taiwan is an island, small in area and easily traversable (and very romantic if you go along the coast) with a scooter. Also, it makes travel by rail convenient, further reducing the need for a car. The large majority of Taiwanese people live in the flat plains in the west and almost no one lives in the mountains, so very few journeys will involve difficult terrains for the 150cc-or-less scooters that most people have.
- There is no snow, ice, or freezing temperatures in Taiwan. This makes scooters practical all year long, increasing utilization.
- Housing eats up a lot of income, reducing demand for cars and driving up scooter use. This also means that real estate for car parking is expensive. The average Taiwanese household needs to put nine years of pre-tax household income toward an average apartment, excluding mortgage interest (in Taipei it is 15 years). Adjusted for income, the six major Taiwanese cities’ housing affordability stacks up with the best (worst) of them:
- Scooters are part of the culture. When you grow up riding a scooter and your parents had a scooter, it’s natural to have the scooter mentality and not think twice about getting a scooter. Plenty of people can afford cars but just choose to scooter, because it’s the Taiwanese thing to do.
Why is it the Taiwanese thing to do? The aforementioned reasons describe why Taiwanese people continue to scooter today, but where did the tradition come from? For that, we have to dig a little deeper and look at the history of Taiwan.
In the 18th and 19th centuries, much of Taiwan’s economy was driven by sugar, tea, and rice. During most of the 50 years as a Japanese colony (1895–1945), Taiwan remained an agricultural economy whose primary goal was increasing productivity to satisfy demand within Japan. Although Japan greatly helped modernize Taiwan during this time, the colonial policy was still “Industry for Japan, Agriculture for Taiwan” — until the 1930s, when Japan started promoting industrialization in Taiwan to support wartime needs. But industrialization was short-lived, as Allied bombing reduced agricultural output by half and industrial output by a third. Coal and electricity production dropped by 90% and during this time 200,000 productive Taiwanese workers were drafted into the Japanese army.
Taiwan emerged from the second world war under the governance of the Republic of China and the Kuomintang (KMT). After spending a decade getting back to pre-war production levels, it implemented an import substitution policy, in which surpluses from agricultural exports were used to develop domestic industry while high tariffs and import restrictions were imposed. In the 1960s the government issued new regulations in which they heavily taxed both imported cars and car parts (foreign auto manufacturers could set up joint ventures if they engaged in technology transfer, but no one thought the Taiwanese car market was big enough to justify sharing their technology). Domestic car makers lacked technological expertise, had a high cost of capital, and had insufficient economies of scale, so their cars were very expensive. Car use lagged.
Meanwhile, in post-war Japan, wartime aircraft manufacturers were no longer permitted to research or produce aircraft. The top two aircraft manufacturers Nakajima Aircraft Company (present-day Subaru) and Mitsubishi pivoted to the auto industry, and each created commercially successful scooters for Japanese consumers.
In the 1960s, during Japan’s export boom, local wages were increasing and Japanese companies were increasingly looking abroad for cheaper labor to perform manufacturing processes that they had mastered. Taiwan was a natural partner. Many Taiwanese over 35 could speak Japanese and understood the culture, a relic from Japanese efforts to assimilate the Taiwanese colony by strongly encouraging them to learn Japanese and act Japanese. So the Japanese created joint ventures in Taiwan, built factories, trained the Taiwanese, and taught them how to participate in the global economy as a supplier. Taiwan was the largest recipient of Japanese foreign investment during this time.
One such joint venture during this time was KYMCO, the biggest Taiwanese scooter company today, which was initially a parts supplier for Honda. They eventually started manufacturing scooters using Honda technology and are now the fifth largest scooter manufacturer worldwide. SYM Motors, the second largest Taiwanese scooter company, also got its start from a 1960s joint venture and today does $1 billion in revenue a year. So the availability of local, tariff-free, high-quality scooters during a time of car import substitution policies contributed toward widespread scooter use.
Adding to the reluctance to buy a car was that the KMT and the Nationalists had thought up to and through the 1970s that they could take back mainland China from the Communists, and that Taiwan was just a temporary home. A car would have been too big of a commitment for those who were expecting to return home and a scooter was a good compromise.
Today, the impact of simultaneously being a scooter country and a developed country can be seen in that Taiwan is leading the way in new scooter technology. Taiwan-based Gogoro has raised $480M for their electric scooter and network of battery exchange stations and aims to go global. WeMo Scooter has their sights on electric scooter sharing and has unicorn ambitions as well.
I don’t think scooters in Taiwan are going anywhere, even as per capita GDP continues to increase. Future electric versions should continue to be the most cost-effective and convenient mode of transport for many Taiwanese people, especially when combined with sharing and public transportation options. And when shared autonomous electric cars take over and car ridership increases, streets will clog up and many people will still turn to their trusty scooters. Their beloved, perfectly good, distinctly Taiwanese scooters.
Credit to AppWorks partner Joseph Chan, my mentor during these ten weeks who always pushed me to find out the “why”, and was the inspiration for this post. Thanks to everyone at AppWorks who shared their ideas with me on this topic.
- Arnold, Walter. “Bureaucratic Politics, State Capacity, and Taiwan’s Automobile Industrial Policy.” Modern China, vol. 15, no. 2, 1989, pp. 178–214. JSTOR, www.jstor.org/stable/189365.
- Chan, Kwok-bun, Tak-sing Cheung, and Agnes Ku. Chinese Capitalisms (Social Transformations in Chinese Societies), 2008.
- The Economic History of Taiwan.
- A Brief History of Taiwan.
- Fuji Rabbit Scooters.
- Taiwan in World War II.
- Many Wikipedia pages