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Automakers on road to prosperity

Released at: 14:33, 02/06/2019

Automakers on road to prosperity

Photo: Viet Tuan

Large Vietnamese automakers are striving to lead the country's auto industry down the right path to development.

by Nghi Do

The first motor cars from Vietnamese automaker VinFast officially rolled off the factory floor in March and orders have already been coming in from local customers. The company announced in mid-April that its auto manufacturing factory will be put into official operations in June. Together with the long-standing presence of foreign auto giants, the arrival of the Vietnamese newcomer is expected to contribute greatly to completing an auto manufacturing network in Vietnam.


With construction having started in September 2017, the factory sits within VinFast’s 335-ha automobile and motorbike production complex at the Dinh Vu Industrial Park in northern Hai Phong city. It is expected that, in the first phase, the auto manufacturing side of the complex will have a total output of 250,000 vehicles each year. Production is set to reach 500,000 cars annually in the second phase, by 2025.

Its vehicles were sent to 14 countries across Asia, Europe, and Africa as well as Australia in the first quarter of this year and received positive evaluations from leading inspection centers in the world.

Production is fully synchronized and closed, with workshops for stamping, welding, painting, and assembly, some of which are considered difficult for auto makers, according to a 2018 report from the US-based Altera Solutions, an original equipment manufacturer (OEM) and consulting company. VinFast’s capacity is equal to other manufacturers such as Daimler, Mazda, Suzuki, Jaguar, Land Rover, and Ford in terms of in-house production. “From investing in producing needle plates, laser-based assembly, and solder automation technology, the company has taken its localization rate to a new height,” the Altera Solutions’ report stated.

Dr. Truong Manh Hung, a lecturer with the Mechanical Engineering Faculty at the University of Transport and Communications, said that certain phases such as heat treatment technology and base unit assembly are quite difficult for any local manufacturer, as Vietnam’s metallurgical industry lacks investment and is outdated. The level of business cooperation between enterprises also remains limited and links are yet to be fully established. As such, poorly-performing support industries result in local auto production costs being 10-20 per cent higher than those of imported vehicles from ASEAN.

Vietnam now has 358 enterprises involved in auto production, including 50 assemblers, 214 accessory producers, and 45 chassis, trunk and body makers, compared to 385 in Malaysia and a whopping 2,500 in Thailand, according to the Department of Legal Affairs at the Ministry of Industry and Trade (MoIT). With huge capital investment from VinFast’s parent company, Vingroup, it will be perfectly capable of leading the country’s auto assembly and manufacturing industry, Dr. Hung believes.


Vietnam’s auto industry has developed rapidly over the last two years with several major projects underway. While VinFast is pushing ahead to reach its target for this year, 20-year-old Thaco opened the largest and most modern auto manufacturing plant in Southeast Asia in March. The Thaco Mazda plant works under the same standards and criteria on product quality as Mazda’s global production network. VND12 trillion ($530 million) has been invested to manufacture and assemble Mazda-brand automobiles, with a capacity of 100,000 vehicles annually, in part of the Chu Lai - Truong Hai Automobile Industrial Park in central Quang Nam province.

The group also signed a technology transfer and product distribution contract last year with many major global corporations to continue to be the most powerful enterprise in producing and distributing vehicles in Vietnam. It invested VND80 trillion ($34.4 million) into the 400-ha Chu Lai - Truong Hai Automotive Mechanical Complex, which includes 30 local and international manufacturers such as Kia, Mazda, Mitsubishi Fuso, and Peugeot. “With mechanical engineering and automobiles as our main business, we will be able to join the global value chains of renowned and long-established automakers,” said Thaco Chairman Mr. Tran Ba Duong. The group will refurbish almost all of its auto manufacturing and assembly plants, including those for Kia and Mazda premium motor cars and buses, and parts manufacturing plants to raise the localization rate to above 40 per cent before exporting to the ASEAN region. It will also make production costs per unit more competitive, which has long been an issue for local manufacturers.

Last year, the Hyundai Thanh Cong joint venture between Hyundai Motors and the Thanh Cong Group announced the construction of its second auto plant, in northern Ninh Binh province, with a production capacity of 40,000 each year and investment of VND1.3 trillion ($55.9 million), as part of plans to satisfy domestic demand and export to ASEAN. A representative from the Thanh Cong Group said that with the construction of this second plant, it will bring to the market the latest eco-friendly models and contribute significantly to the development of Vietnam’s auto industry.

According to a 2018 report from MoIT, domestic auto manufacturers clearly aim to reach the same level as auto makers in ASEAN countries like Thailand, Indonesia, and Malaysia and have set their sights on the Southeast Asian market. VinFast, Thaco, and the Thanh Cong Group are working to boost local support industries and the local auto industry as a whole so the country becomes a Southeast Asian powerhouse.


At a meeting with leaders from Hyundai Motors in February, Deputy Prime Minister Trinh Dinh Dung asked them to promote technology transfer to local partners and increase localization rates to at least 40 per cent. “Developing the auto industry is a key policy in Vietnam’s industrialization strategy, with priorities given to local producers,” he said. “The government will provide policy support to automakers, but not at the cost of breaking its international integration commitments.”

Domestically-made and assembled vehicles will be able to compete fiercely with imported products from ASEAN countries such as Thailand and Indonesia after deeply integrating in the region, with tariff barriers to almost be completely removed in the near future. For VinFast, despite its advantages, its long-term issue is connecting and building a network of component suppliers capable of meeting European standards, so it can offer quality vehicles in the domestic and overseas market, local analysts have said.

In terms of policy, MoIT will build a pilot parts supply chain for automakers and assemblers at home and abroad, and study mechanisms and polices to attract investment from multinationals in large-scale projects, especially those focused on brands and models not found elsewhere in ASEAN. It will also create the necessary conditions for local enterprises to join multinational auto production chains. The ministry also plans to revise Government Decree No. 111 on support industry development, to resolve existing shortcomings.

According to the Vietnam Automobile Manufacturers Association (VAMA), the volume of locally-manufactured and assembled autos reached 250,000 units in 2018, up 10 per cent against 2017. Certain types of vehicles have been exported to Laos, Cambodia, Myanmar, and central America. The target for localization rates in the industry is 35-40 per cent by 2020, according to MoIT. Demand for motor cars is to reach more than 600,000 units per year by 2025, as the average per capita income in the country is forecast at $3,000, according to the Department of Legal Affairs. As such, many local and foreign auto companies see opportunities and growth potential in the local market.

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