Registrations continue to decline no matter how hard motorcycle makers try.
In the middle of January media reports surfaced saying that Honda was planning to relocate its production and assembly lines of motorcycles under 50cc to Japan. Honda has not confirmed the reports to date. Thoughts as to the reasons why include it planning the move due to lower manufacturing costs in its home country or that Vietnam's motorcycle market is becoming less and less attractive. Whatever the reason, it can't be denied that Vietnam's motorcycle market has been in decline over recent years.
Fighting the fall
The number of motorcycles produced and registered in Vietnam stood at 41.5 million as of last year, representing approximately 85 per cent of all registered vehicles in the country. However, there were only 2,916,689 motorcycles registered last year, compared with 3,272,160 in 2013, 3,282,790 in 2012, and 3,671,440 in 2011.
Of the number of motorcycles produced in 2014, 2,643,917 came from seven foreign-invested manufacturers. The big five (Honda, Suzuki, Yamaha, VMEP - SYM, and Piaggio), who are all members of the Vietnam Association of Motorcycle Manufacturers (VAMM), produced 2,627,220 units, and Lifan Vietnam and Kwang Yang Vietnam produced 14,000 and 2,697, respectively. The remaining 272,000 belong to ten domestic motorcycle makers.
To make their business operate smoothly, enterprises have spent a lot of effort on launching new products, running major promotional programs to build consumer awareness of their products. Honda Vietnam - the biggest motorcycle maker by output in Vietnam - has launched dozens of new models over the years with promotional programs to stimulate demand. Mr. Masaru Ono, General Director of Yamaha Vietnam, said that the company has run 300 promotional programs to introduce new products and address the problems the brand faces. Despite these efforts, the market has declined every year, especially last year.
Earlier, in October last year, five members of VAMM announced the number of motorcycles sold in the period from April to September 2014. Honda, Piaggio, Suzuki, SYM and Yamaha sold 1,250,759 motorcycles, a 2.2 per cent decline year-on-year. In 2013 the foreign makers sold 2.79 million motorcycles and 3.11 million and 3.4 million in 2012 and 2011, respectively. Figures for the second half of the fiscal year (from October 2014 to March 2015) will be released in April.
The most important factor right now to be the leading company in the market is brand image. This makes smaller companies such as SYM consider other strategies to become more competitive, such as pricing. "If we launch a new scooter the retail price needs to be cut by 5 to 10 per cent so it can compete with Japanese companies," said Mr. Chen Pang Hsiung, General Director of SYM Vietnam. He also revealed that SYM will invest more in brand image in the future.
Facing the future
Being in the same situation as motorcycles three years ago, Vietnam's automobile market has seen significant increases in sales volume recently. Last December was the 21st successive month the sales volume was higher year-on-year, according to the Vietnam Automobile Manufactures' Association (VAMA), despite a sharp downturn in 2012, by 16.76 per cent from 16,692 units in 2011 to 80,487 units. Even so, three years on and the automobile market is much healthier, which implies there is still hope for the country's motorcycle market.
In general, the fall in motorcycle sales has continued year after year and may well bode ill for the future, but there are still bright spots to consider.
With the sale of 2.9 million units last year, Vietnam remained the fourth largest motorcycle market in the world, after mainland China, India and Indonesia. From 2007 to 2014 total sales of motorcycles were up and down, at between 2.5 and 3.3 million units, for an average of around 2.9 million units each year. When comparing these numbers with sales in other countries, such as Japan, with less than 600,000 units, and Taiwan, with less than 700,000, companies will still come here to invest in the motorcycle industry, Mr. Hsiung believes.
There are two other main reasons to believe in a solid future. The first is that Vietnam's GDP growth is going up. With economic recovery, people will more easily afford to buy a new motorcycle. The second is that a lot of transportation infrastructure is under construction. Mr. Hsiung believes that these factors will increase the sales volume of motorcycles or, at least, see them remain flat.
There are still risks facing the market, however. Urban railway projects are now underway in Hanoi and Ho Chi Minh City, with completion expected within two or three years. This will put further pressure on the motorcycle and, indeed, the motor car market. To avoid any major impact, motorcycle makers need to focus more on markets in specific geographic areas. In February, Minister of Transport Dinh La Thang recommended motorcycle makers research, develop and launch motorcycle lines exclusive to rural areas, with suitable design and speed capacity. This may be a sensible move to make, since demand in rural areas remains high.
A stronger focus on exports is another option for motorcycle makers. This would be good not only for the companies but also for Vietnam. Most companies have been using Vietnam as a production base for exporting to other countries, mostly in Asia and even Europe and Africa. Honda uses production from its three factories in Vietnam to export products to Japan, Laos, Malaysia, Cambodia, the Philippines, Pakistan and Italy. Mr. Costantino Sambuy, General Director of Piaggio Vietnam, has said that exporting scooters from Vietnam has always been part of the company's strategy. Vietnam is a regional hub for Piaggio as it is home to its only production facility in ASEAN.
As for competitiveness, Honda and Yamaha have long been the big players in Vietnam but the focus on scooters is increasing. "Maybe within the next three years, scooters will occupy more than 50 per cent of the market because they are more fashionable," said Mr. Hsiung. This will allow scooter-oriented motorcycle makers such as Piaggio and SYM to perform better, thus making the market more competitive. The trend towards scooters is quite clear. Twenty years ago people mostly rode bikes of 50cc or less. Ten years ago scooters had acquired around 40 per cent and today it stands at 43 per cent. This is not only due to better living standards but also changes in tastes. People nowadays not only prefer motorcycles for their function but also for their style.
Another factor is the change in actual design and style. Vietnamese do not follow the Japanese style, instead being more influenced by the European style, mainly French and Italian, according to Mr. Hsiung. He revealed that SYM would soon launch a new simple but elegant and totally new European style motorcycle aimed at Vietnamese users.
"One of the most important lessons in the motorcycle industry over the last year is competitiveness and technology transfer, which enterprises have done well. Though the motorcycle market is quite saturated at the moment, the upcoming open door policy will present competitive opportunities in Vietnam. While competitiveness may bring certain markets to an end, it will only push the motorcycle market forward."
Dr. Vo Tri Thanh, Deputy President of the Central Institute for Economic Management (CIEM)
"Vietnam is in the big four in terms of the motorcycle industry. The people are good, the market is good, and the future is good."
Mr. Chen Pang Hsiung, General Director of SYM Vietnam
- motorcycle market