At a time when automobile firms across the developed world are struggling to maintain up with profit pressure from wealthy technology firms, Vietnam is betting on automobile manufacturing as a gateway to a more prosperous economy, because it did for Japan and South Korea, Reuters reports.
VinFast, a unit of Vietnam’s largest conglomerate Vingroup JSC VIC.HM, is poised to turn out to be the country’s first full-fledged carmaker when the primary production models under its own brand hit the streets in August next yr.
“Where else in the world can you do this at this speed?” said Shaun Calvert, vice chairman of producing at VinFast Trading and Production LLC, searching over an area of the factory floor that nine months earlier had been nothing but sea.
Calvert recently spoke concerning the company’s recent factory, a sprawling island complex within the North Vietnamese port city of Haiphong, where each models of aircraft might be built.
VinFast will have the ability to begin producing 250,000 cars a yr in the subsequent five years, accounting for 92 percent of all cars sold in Vietnam last yr, in accordance with data collected by the Vietnam Automobile Manufacturers Association (VAMA).
Vingroup says it began work on VinFast just over a yr ago and has allocated around $3.5 billion to the project.
“We are driving the rapid expansion of the domestic auto market, so we are absolutely focused on winning here first,” Chief Executive Jim Deluca said ahead of this week’s Paris auto show, where VinFast will announce its first export markets.
“We want to grow both within and outside ASEAN.”
Most cars sold in Vietnam are foreign brands assembled domestically from kits. But a series of free-trade agreements have lowered import tariffs and opened up the market. This yr, a 30 percent import tax on cars from other Association of Southeast Asian Nations (ASEAN) countries was abolished.
ELECTRIC SCOOTERS
Vingroup already dominates Vietnam’s real estate market with Vinhomes, has entered the healthcare market with Vinmec, runs the Vinmart supermarket chain and provides tourist entertainment with Vinpearl resorts.
“There are probably 4 million customers associated with Vingroup in one way or another now, so it’s a huge brand that consumers aspire to, and those customers are ready for a domestic VinFast product,” Deluca said.
In a rustic known for its motorcycles, which zip through the congested streets of Hanoi and Ho Chi Minh City, VinFast also goals to provide 250,000 electric scooters a yr, along with its 250,000 cars. The ambitious goal is to eventually grow production to 1 million units a yr.
VinFast has also begun work on the event of a battery-powered electric vehicle in cooperation with the German company EDAG Engineering (ED4.DE) that might be introduced in the long run, Deluca added.
“We thought that in terms of the car portfolio, it would be best to start with the internal combustion engine and then introduce a battery electric vehicle soon after that,” Deluca said. “From an infrastructure perspective, charging a scooter is much easier than charging a car.”
The speed at which VinFast grew was possible partly since it used off-the-shelf parts.
The first two VinFast models, an SUV and a small limousine, are built on a BMW frame (BMWG.DE). The components were designed by the Canadian company Magna International (MG.TO) Magna Steyr, while the Italian design office Pininfarina is answerable for the design (PNNI.MI).
“It gives us the ability to move very, very quickly and create a vehicle that is 100 percent ours and no different than any other vehicle on the road today,” Deluca said.
“NATIONAL PRIDE”
The company also imported foreign experience. At least five members of VinFast’s management team, including Deluca and Calvert, are veterans of General Motors Co (GM.N).
In June, the American auto giant agreed handy over full ownership of its Hanoi factory to VinFast in order that the Vietnamese company can produce small cars under GM’s global license from 2019.
However, despite VinFast’s institutional experience, entering the highly competitive automotive industry just isn’t without significant risks.
Local automobile assemblers have tried – and failed – to sell domestic models to the masses in Vietnam. Regionally, firms like Proton of Malaysia and Holden of Australia have struggled to realize popularity outside their home countries.
“The key question is why the world needs another car brand in an era where hardware is becoming a commodity,” said Bill Russo, head of Shanghai-based consulting firm Automobility Ltd and a former Chrysler executive.
“The fact that they are outsourcing design and manufacturing and relying on overseas R&D tells me they are following a traditional path that may not be competitive in the era of digital mobility services.”
Bui Ngoc Huyen, president of Vinaxuki, an organization that attempted to create a domestic carmaker but ceased production in 2012 before the primary automobile was officially launched, said Vingroup’s ample financial resources should help but warned that constructing the brand would take time.
“You have to go from making small, cheap cars to luxury cars,” he said. “It will take a few years for a new carmaker to refine their products and gain the trust of consumers. It will take 10 to 20 years.”
Deluca said early VinFast models can be “very affordable” to draw local buyers, but declined to offer pricing details.
But in Vietnam, where tons of of 1000’s of individuals take to the streets with flares and flags to have fun moderate success after under-23 football matches, VinFast is counting on an additional competitive edge
“We think national pride is a huge asset for VinFast,” Deluca said. “What we’re doing here is something special for the men and women of Vietnam.”
