Foreign auto makers drive into Vietnam

VMEP, the second-largest motorbike producer in Vietnam, will increase its investment capital by $70 million to $230 million in order to begin producing light trucks and six- to nine-seat cars.
Both the Ministry of Planning and Investment (MPI) and the Ministry of Industry (MoI) supported VMEP’s proposal, saying that with its current motorbike production base, the company would easily make the switch to automobiles.
However, industry analysts warned that the entry of a third foreign-invested player into the local market would turn up the heat on local car makers, who are in danger of losing business.
Nguyen Van Binh, deputy general director of the Vietnam Suzuki Corporation, said VMEP’s entry into car production would make competition “harsher and harsher”.
Suzuki is set to boost its truck production capacity to 10,000 per year after increasing its investment capital to $60 million by the end of the year, twice what it is now.
He said truck manufacturers who want to obtain success “need to pay special attention to increasing their competitiveness by lowering production costs and increasing quality, not just to compete with other local trucks producers but also trucks imported from China and South Korea”.
Phan Huu Thang, head of the Foreign Investment Agency, told Vietnam Investment Review that demand for light trucks, buses and specialised vehicles remained high in Vietnam.
“So, foreign investors, which have proposals to invest in such kinds of vehicles to serve the economy, will be taken into consideration if they possess large amounts of capital, high capability and experience in car production,” he said.
According to an automobile masterplan recently approved by the government, the country will need around 150,000 trucks, buses and specialised vehicles by 2010, most of which Vietnam currently imports.
So far this year, the MPI has allowed two other foreign-invested firms to begin producing cars and trucks.
Honda Vietnam was licensed to invest $60 million to set up an automobile factory in the northern province of Vinh Phuc, with a yearly output of 10,000 vehicles.
The second, the Malaysia-Vietnam joint venture JRD Vietnam, was licensed early this year to begin producing 10,000 trucks and 5,000 buses per year.
Industry experts said VMEP’s desire to enter the local car market was evidence that it considered Vietnam part of its long-term plans.
However, they warned that an increase in the number of cars on Vietnam’s roads would strain the country’s transportation infrastructure.
There are currently 11 operating foreign-invested automobile firms in Vietnam: Ford Vietnam, Toyota, Vietnam Motor Corporation, Vietnam Daewoo Motor, Vietnam Daihatsu Motor, Hino Motor Vietnam, Mercedes Benz Vietnam, Vietnam Suzuki, Mekong Auto Corp. and Isuzu Vietnam.
The 11 firms have $560 million in combined investment capital.