Posted on 30 November 2007

 

Source: Vietnam Economic Times, November 29, 2007
A lot of automobile manufacturers have decided to increase their investment capital in order to raise output to meet the increasingly high demand.

Expanding investment, pushing up localisation process

According to the Ministry of Industry and Trade, some 80,000 automobiles will be assembled this year, and 25,000 imported. As such, the total number of cars to be consumed this year may reach 100,000, including 60,000 cars.

The fact that automobile manufacturers ‘owe’ clients 10,000 units, and that several manufacturers have orders until the first quarter of 2008 show that the domestic market is prospering.

According to Bui Ngoc Huyen, Director of Xuan Kien Automobile Private Establishment (Vinaxuki), the car market will see the growth rate of 100% this year over 2006, and the figures will be 20-30% in the next years.

Mr Huyen said that the sedan output would reach 100,000 units a year by 2010. With such a big market scale, enterprises will be able to push up the localisation process, which can help reduce selling prices.

The satisfactory business results have prompted automobile manufacturers to expand their investments.

Vinaxuki proves to have the most ambitious investment plan. It has invested VND450bil in making vans recently, and the localisation ratio of its vans has reached 40% (40% are made locally). Vinaxuki has leased 20 ha of land in Dong Anh district in Hanoi to run its project on making cars with less than nine seats capitalised at VND930bil.

Mr Huyen well understands that making cars will require high technologies, but he still believes that Vinaxuki’s cars will have high quality and competitive prices, at least 15-20% lower than foreign made products.

Vinaxuki is also planning to set up a 250 ha factory in Nghi Son Economic Zone specialising in making car parts, accessories and engines, which will help raise the localisation ratio.

It is estimated that Vinaxuki will spend VND2tril on its projects and its first cars will be churned out by 2010.

Truong Hai is also moving ahead with its project on making cars in 2008. Mr Duong said that assembled in Vietnam Kia Morning will be marketed in early January 2008. In the second phase of the car manufacturing project, Truong Hai will make some more models.

The market will be big: 1mil units a year

Toyota Vietnam proves to be the manufacturer with the biggest production plan. In 2007, the manufacturer raised its production capacity from 16,000 units a year to 20,000 units. The company plans to make more investment to raise the capacity to 25,000 units a year inn 2008, and to 30,000 units in 2009.

Innova is the model which has brought big success to Toyota with 20,000 units sold in the last two years. 33% of Innova’s parts are being made locally, and the localisation ratio is expected to increase to 37% in 2008 and 40-45% in the near future.

Nobuhiko Murakami, Director General of ToyotaVietnam, said that in 2007-2009, the company would invest $50mil more, double that in 2004-2006.

Mr Murakami said that Toyota was pushing up investment because of the promising market. He said Toyota would call for more car part producers to Vietnam.

GM Daewoo is also planning to expand its investment in Vietnam and raise the capacity to 25,000 units a year which will provide cars for the domestic market and for export.

Analysts have said that the scale of Vietnam’s market may reach 1mil cars a year, equal to the current market in Thailand. Currently, Vietnam has nearly 1mil for 80mil of population, i.e. there is one car for 80 persons, while the ratio in the world is one car for 8 persons.

Vietnam belongs to the world’s last potential markets, which include ASEAN countries and China, which have the scale of 12mil units a year, equal to the current North American market.

The Ministry of Industry and Trade is proposing to lower the luxury tax on 3,000cc and less cars and the tax on car parts. If the proposals are accepted by the government, the automobile market is expected to boom in some years.

 

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