Hu Lane Associate (MV $437M): Asia ex-Japan’s #1 Automotive Connector, the “Nervous System” in Smart Cars

Hu Lane Associate (HL) (GreTai: 6279 TT) is Asia ex-Japan’s largest maker of terminal connectors in automobiles and motorcycles, a mission-critical auto part that is dubbed the “nervous system” of cars whose electronic content is rising due to the Green, Connected, Autonomous automotive trends. While it is considered a Tier-2 auto parts supplier, Hu Lane (HL) directly participates in the design process of Tier-1 suppliers for most of its automotive terminal products to be “designed-in” and as a result, enjoys sole supplier rights during the first 2-3 years following a new model launch. In addition, HL has changed its sales model in China from a distributor model to direct selling, forging Tier-1 relationship with the major Chinese automakers, including accounting for over 50% of automotive terminal connectors used in emerging electric vehicle maker BYD (1211 HK). Established in 1977, HL is listed on the GTSM in 2003. HL’s top customers are Changan Automobile (around 10% of sales), BYD (5%) and major automakers that include Great Wall, Geely, SAIC-GM-Wuling, Dongfeng Motor, Chery, Taiwan’s Yulon Motor Group, Nissan Taiwan, Honda Taiwan, Ford Taiwan, Hyundai Taiwan, FIAT, Peugeot, Toyota, Mazda, Mitsubishi, Isuzu, Suzuki, Yamaha, KIA etc. Its top ten customers account for around 44-50% of sales. HL has pursued the strategy of a diversified customer base to lower operating risk and the rest of sales contributed by hundreds of customers. HL operates factories in Taiwan, China (Nanjing, Dongguan, Shenzhen) and Vietnam.

1) What Makes It a Wide-Moat Business?

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