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Nikkei Asian Review
Vingroup trains sights on car market in Vietnam and beyond
Plant opening a milestone in government-backed quest for
homegrown auto sector TOMOYA ONISHI
HANOI -- Leading Vietnamese conglomerate Vingroup is chasing an
ambitious goal of building half a million vehicles a year,
after opening a new automobile factory Friday against all expectations. But
the true challenge lies ahead as homegrown cars hit the Vietnamese
market for the first time, taking on more-established rivals from Japan
and elsewhere.
"Nobody believed that a Vietnamese company could make cars, but we have
done it," Vietnamese Prime Minister Nguyen Xuan Phuc said at the opening
ceremony in Haiphong. "I'm
convinced that Vingroup will succeed," the prime minister said.
Vingroup has expanded from its real estate roots to a wide range of
businesses, such as hotels, stores and hospitals. It is the most
valuable company on the Ho Chi Minh City Stock Exchange. It
is now aggressively moving into new frontiers, like electronics and
automobiles. It launched the Vsmart smartphone brand in December.
Vingroup announced this month production facilities with capacity of 125
million units a year in early 2020, shocking industry insiders. With
the new factory, the conglomerate has entered the auto industry less
than two years after planning began, despite heavy skepticism among
more-established automakers. It will begin deliveries Monday of the
Fadil hatchback, with plans to debut a sedan and a sport utility vehicle
in July. "We
have already received orders for over 10,000 vehicles in total,"
Vingroup Vice Chairman Nguyen Viet Quang said. The group also plans to
start selling electric vehicles by the end of the year.
Vingroup's lightning-fast entry into the auto industry was propelled in
part by European support. It adopted BMW technology for the chassis. It
also worked with dozens of companies, mostly German players like Robert
Bosch, to develop needed parts. The
group will need to pay for components and licenses to its European
partners. "The cars are Vietnamese only in name," a critic said.
Unconcerned by such technicalities, the government is throwing its full
weight behind Vingroup's vehicles. It introduced complex quality
controls for imported cars in January 2018, using nontariff barriers to
squeeze foreign competition.
Vingroup hopes to reshape the Vietnamese auto market as a whole. It
recognizes that it currently cannot compete with more-established names
in gasoline-powered vehicles. But with a broader lineup, and as the
market shifts to environmentally friendlier cars, "the competitive
balance could change," a Vingroup source said. The
company announced in May a roughly $1 billion investment from South
Korea's SK Group. The deal reflects Vingroup's interest in the market
for electrics, given that SK makes batteries for them.
Vietnam's per capita gross domestic product reached about $2,600 in
2018. In big cities like Hanoi and Ho Chi Minh City, it has already
topped the $3,000 mark where consumption of durable goods, like cars,
starts to truly take off. Auto sales here are expected to hit a record
of over 300,000 units this year. But
despite the surge, Vietnam's auto market is still only a quarter the
size of Indonesia's -- the largest market in the Association of
Southeast Asian Nations. And Japan's Toyota Motor is the biggest single
brand here by far, with a roughly 24% share.
Vingroup is not the first Vietnamese company to try cracking the auto
market. Xuan Kien Automobile attempted to build homegrown cars as well
but had essentially given up by 2015 without ever releasing the
vehicles.
There is too little support for Vietnamese-made cars, Xuan Kien founder
Bui Ngoc Huyen had said at the time. The company's downfall stemmed
partly from a failure to work together with the government.
Exports are to account for much of the annual 500,000 or so vehicles
Vingroup plans to eventually produce. But before it can turn its eyes
outward, the company will need to cement its position at home. |