What is make and model of car

In 2020, Thaco exported 1,407 CBU cars of different kinds, worth $50 million, to Thailand, a big automobile manufacturing center in Southeast Asia. Ford Vietnam, after increasing its production capacity to 40,000 products a year, has begun exporting EcoSport, Transit and Tourneo to some regional markets.

In early 2021, VinFast caught public attention when stating that it was going to export two high-end electric vehicle models – VinFast VF33 and VinFast VF32.

Meanwhile, TCMotor is preparing to export cars to regional markets by expanding production capacity, building a second factory that can produce 100,000 cars.

Ford Vietnam’s CEO Nguyen Van Dung admitted that Ford’s exports remain modest, but the export scale will be larger in the future. The manufacturer expands its factory to serve domestic demand and export. The car models which are only assembled in Vietnam will be exported to other regional countries.

According to Thaco’s president Tran Ba Duong, Thaco is planning to export more cars made in Chu Lai to regional markets.

Vingroup’s president Pham Nhat Vuong affirmed that VinFast will export Vietnamese branded electric cars to the US in 2021 and it is willing to spend $2 billion to reach that goal.

Le Ngoc Duc, CEO of TC Motor, said that Hyundai Motor, when cooperating with Thanh Cong Group, aims to turn Vietnam into a Hyundai automobile manufacturing center in Southeast Asia, which will not only satisfy domestic demand, but also exports.

Businesspeople believe that the Vietnamese automobile market is growing fast, so Vietnam has all conditions to develop supporting industries and increase the localization ratio.

The car demand in the country, where living standards have improved, is high enough for large-scale manufacturing. Meanwhile, the zero percent preferential tariff will help make it easier for Vietnam’s products to enter regional markets.

History shows that large automobile manufacturers that gain great successes all have large export markets. There is no successful automobile manufacturer that only sells products domestically.

History shows that large automobile manufacturers that gain great successes all have large export markets. There is no successful automobile manufacturer that only sells products domestically.

Automobile manufacturers all try to export products, or expand markets, thereby increasing output, optimizing costs and improving competitiveness.

Experts believe that Vietnam has certain advantages to make cars for export, including the auto manufacturing industry’s global division of labor which defines which country makes what kinds of cars and where to export products. Thaco and Ford Vietnam export cars based on this labor assignment.

South Korean automobile manufacturers now want to expand their markets in Southeast Asia. South Korean products sell well in Vietnam, but not well in other regional countries. Investing in Vietnam to make cars for both local sale and export has been proposed.

Meanwhile, VinFast has decided to develop electric vehicles, which is a growing consumption trend in the world. The US and some other countries are applying policies to encourage the sale of the environmentally friendly vehicles.

However, experts warn that it will not be easy for Vietnam to become a country to export cars in large quantities like Thailand and Indonesia. In order to export cars, products must have high quality and competitive prices. These are still not Vietnam’s advantages.

Vietnam’s car part supply chain remains weak. There are fewer than 80 enterprises that make personal car parts to provide to 10 original manufacturers. These include 18 first-class vendors and 58 second- and third-class vendors, figures which are very small compared with 2,000 car parts in Thailand and 1,000 in Indonesia.

The car parts that can be made in Vietnam are mostly simple and cumbersome sets of components.

Experts pointed out that if Vietnam just imports car parts to assemble domestically, it won’t be competitive in price. The production cost of the cars assembled in Vietnam is 20 percent higher than in Thailand and Indonesia.

The Ministry of Planning and Investment is building a plan on developing an ecosystem for the automobile industry which aims to develop the number of Vietnamese vendors.

It is expected that Vietnam would have 1,000 enterprises by 2025 and 2,000 by 2030, capable of satisfying 45-70 percent of demand for car parts in Vietnam.

If the goals can be reached, the export of CBU cars will be feasible. In order to reach that goal, Vietnam needs to have policies strong enough to encourage investments.

Tran Thuy

Vietnam automobile industry on recovery path despite Covid-19

Vietnam’s rising income per capita would soon move cars from a luxury product with a passenger vehicle density of 34 per 1,000 to a more ordinary one with a density level comparable to countries in the region.

Automobile industry: localization ratio still low, price still high

After 25 years of development, the automobile industry has failed to reach its localization ratio goal, while cars in Vietnam are more expensive than other regional countries.

High technology and innovation are the keys for Vietnam to escape the status of doing outsourcing for foreigners

“If we are not brave enough to invest in science and technology and innovation, we will get stuck in the low-productivity, low-added value and middle-income trap,” Prime Minister Nguyen Xuan Phuc said recently at a groundbreaking ceremony in Hoa Lac Hi-tech Park in Hanoi.

Investing in technology and innovation is extremely important for Vietnam to bring products to a new height and escape the status of doing outsourcing for foreigners which the country has been clinging to for decades.

This is not only true for technology firms but for all enterprises in the economy. Applying and inventing new technologies can help increase productivity and heighten enterprises’ positions.

Electric cars and smartphones are tangible products which can show the resilience of Vietnamese enterprises in the 4.0 era.

Established in 2008 and starting at the bottom of the ranking of commercial banks in the first four years of operation, TP Bank decided that it would digitize and apply high technologies even in its early days.

“TP Bank understands that it needs to digitize to become a digital bank, or it won’t be able to compete with large longstanding banks,” a representative of the bank said at a digital technology business development forum in 2020.

Meanwhile, Viettel is building a digital business culture with the focus on flexibility, creativity, customer orientation, digital thinking and openness.

It has accelerated digital transformation in internal administration, applying modern technologies with international standards. All documents at Viettel have been digitized, 50 percent of manual work has been liberalized, and 30-40 percent of tasks have been automated.

Its ecosystem of digital products provide B2C and B2B services in a wide range of fields, from finance (Viettelpay), digital marketing and OTT (Mocha, Keng), customer care (MyViettel, Viettel ++), e-government, and SmartCity.

The message “Make in Vietnam” initiated by the Ministry of Information and Technology (MIC) has created vitality in the startup community. Vietnam has become the fifth country in the world mastering 5G technology, producing 5G infrastructure equipment and 5G smartphones. This stems from Make in Vietnam pride.

Over 13,000 digital technology firms were established just in the last year, raising the total number of digital technology firms to 58,000. The figure proves that the Make in Vietnam slogan has been realized in real life.

Adding high value

Nguyen Minh Quy, CEO of Novaon, commented that if Vietnam continues to do outsourcing, it will only be a very small part of the value chain.

Vietnam is among the top countries in the region and the world in some fields, such as telecommunications and power. In the last 20 years, Vietnam has been among the countries maintaining high growth rates.

An iPhone model can sell for $1,000, but the highest value belongs to the first links of the chain (learning about customers’ demands, research, product design) and the final links (distribution and marketing). A very small value is allocated to production.

At the closing of the national forum on digital technology firm development, Minister of Information and Communications Nguyen Manh Hung spoke about a noteworthy matter. Only 5-6 developing countries become developed after every so-called ‘revolution’. The 4.0 industrial revolution brings opportunities only to some countries. Vietnam and developed countries are at the same starting line.

“Mobile Money started in Kenya, a poor country in Africa. Poverty motivated advancement. Vietnam needs to lead in the 4.0 industry revolution. If Vietnam pioneers in applying 4.0 technology, the world will come here and Vietnam’s products will reach out all over the globe,” Hung said.

“Becoming a pioneer is always the aspiration of the Vietnamese nation and every Vietnamese citizen. It is difficult to implement this, but it is not impossible,” he said.

“Vietnam is behind many countries and it once missed a lot of opportunities on the development path, but this doesn’t mean that we will continue to endure and accept a low position,” he said.

Vietnam is among the top countries in the region and the world in some fields, such as telecommunications and power. In the last 20 years, Vietnam has been among the countries maintaining high growth rates.

And now, Vietnam has more motivating power from the 4.0 industrial revolution, from Make in Vietnam and digital transformation. So, Vietnam’s growth engine will have an additional push to turn the aspiration of becoming a high-income country by 2045 into reality.

In order to accomplish that, the space for creativity must be expanded, while management thinking needs to be reformed, so that creativity is not hindered by rigid regulations and officials’ bureaucracy.

Le Xuan Sang, deputy head of the Vietnam Economics Institute, stressed that Vietnam needs to reform the way of thinking and the institutional regime with the aim of encouraging participation of non-state sectors in science and technology development and innovation.

The expert believes that information technology and digital transformation should be seen as an important push and pillar to support the recovery process, strengthen resilience, and improve growth quality.

Ha Duy

“Make in Vietnam” key to Vietnam’s target of high income by 2045

Nguyen Quang Dong, Director of the Institute for Policy Studies and Media Development, talks about Vietnam’s efforts to master science and technology production to help it achieve the goal of becoming a high-income country in 2045.

Make in Vietnam, by Vietnam for a fresh digital orientation

Vietnam has made impressive steps in its digital transformation journey in 2020, with strong aspirations and ambitious targets set through the launch of the Make in Vietnam programme.

Many new car models have been launched recently, especially B-class sedans.

Mitsubishi Motors Vietnam on February 22 introduced Mitsubishi Attrage 2021. New Attrage CVT Premium 2021 version is said to have notable upgrades, priced at VND485 million. The manufacturer has committed to prop up 50 percent of registration tax, worth VND24 million applied until the end of February.

Prior to that, on December 9, 2020, Honda City 2021, described as a ‘miniature’ Honda Accord, was introduced with a lot of changes in design and equipment. Honda City 2021, with three versions, assembled and distributed in Vietnam, have prices between VND529 million and VND599 million.

Also in December, Hyundai Accent 2021 version with a slight update was introduced to consumers with prices nearly the same as the previous version, between VND426.1 million and VND542.1 million.

However, since the launch, both Hyundai Accent 2021 and Honda City have been in short supply.

Other market segments have also warmed up with new models launched. The MG ZS upgrade model has been available in the market since mid-January with two versions – ZS Com+ and Lux+ – with retail prices of VND569 million and VND619 million, respectively.

In the high-end market segment, Volkswagen Tiguan, Toyota Alphard, Lexus IS and BMW 750Li have been brought to Vietnam. Meanwhile, Ford Everest Sport 2021, MG ZS STD 2021, Isuzu D-Max, Mercedes E-Class, Toyota Camry 2021 and Honda BR-V 2021 will be introduced soon.

Analysts say that automobile manufacturers and distributors decided to market new models despite the third Covid-19 outbreak, showing their optimism about market demand.

Car dealers believe that the market situation will not be good in Q1 and sales may decrease sharply as seen in April 2020.

Quang Huy, the business director of a car sale agent in Hanoi, said slow sales are commonly seen now.

“I think sales will drop dramatically as they did in April 2020 (- 44 percent) and the car prices will also decrease. The market will only get warmer in April or May, when transport firms return to make purchases,” he said.

The Vietnam Automobile Manufacturer Association (VAMA) reported that 26,432 cars were sold in January 2021.

The Vietnamese car market performance was a surprise to analysts as it was lackluster in the first months and unexpectedly bounced back in the last months with sales in December jumping by 45 percent compared with December 2019.

Chi Bao

Car sales number 2019-20. Unit: thousand cars. Source: SSI

In spite of severe impacts from the Covid-19 pandemic, Vietnam’s automobile industry is set to grow by 16.3% year-on-year this year in terms of car sales number, according to a study from the SSI Securities Corporation, citing high demand from the domestic market for cars.

“Since the outbreak of the pandemic last year, demand for cars were heavily affected as people opted for staying at home,” noted the SSI.

However, once the situation is put under control, customers would quickly turn to cars to take advantage of sales promotion programs being offered by car dealership.

“The majority of customers looking to buy cars are of the middle to high income groups, so they are less affected by the pandemic compared to other lower income groups,” said the SSI.

According to the SSI, Vietnam’s income per capita is on the rise and set to grow at an average of 8-10% in the next decade.

“Compared to regional countries, the current income per capita is fast approaching to a point of bursting demand for cars,” asserted the SSI, adding cars would soon move from a luxury product with a passenger vehicle density of 34 per 1,000 to a more ordinary one with a density level comparable to countries in the region.

Meanwhile, car production capacity domestically is increasing rapidly to meet customers demand, a key step to lower car prices, noted the SSI.

With more cars manufacturing and assembling plants scheduled to complete in the 2022-23 period, the SSI expects a heating up car markets with steep discount policies to drive up domestic car demands.

Along with existing Vietnam’s support policies for the automobile industry, the National Assembly is currently discussing a possibility of reduce the excise tax rate for locally made cars, in which the specific reduced rate would be in line with the localization rate of each car, aiming to boost sales of affordable car models.

“The move, however, is unlikely at the current Covid-19 crisis, given the contribution of excise tax for cars making up 4.4% of state budget revenue,” said the SSI.

Domestic car market large enough for manufacturers to move in

The SSI also pointed to a key factor that the domestic car market is big enough for car manufacturers to shift from importing cars to assembling/manufacturing domestically.

At present, six major car manufacturers of Thaco, Huyndai, Toyota, Mitsubishi, Ford and Honda account for 90% of the market share in Vietnam with a combined production capacity of 30,000-60,000 units per year, exceeding the break-even point for domestically-produce cars of 30,000-40,000 cars per year for an assembling plant, or 10,000-20,000 units for each car model.

Over the past two years, four global car manufactures have announced their plans of investing in large-scale assembling/producing car plants in Vietnam.

“More assembling car plants in Vietnam would boost demand for auto parts and eventually the development of the car supporting industries,” stated the SSI, saying this would mean higher localization rate.

Hanoitimes

New regulations to change Vietnam automobile industry in 2021

Cars in Vietnam since 2021 are subject to new regulations such as registration fee, import tariff, and higher emission standards.

It has been reported that Vietnam is some way off achieving some mid- to long-term manufacturing targets. How do you evaluate domestic enterprise capacity in this regard?

Kyoung-Jin An, deputy director of the Vietnam Technology Advice and Solutions from Korea Centre (VITASK)

The Vietnamese supporting industries have many opportunities to develop as several large foreign groups such as Samsung, Hyundai, and LG plan to increase localisation rates in Vietnam. However, few Vietnamese enterprises can become their first-tier vendors, with almost all Vietnamese enterprises manufacture exclusively in packaging and simple spare parts.

In terms of car assembly and manufacturing, for example, a Ministry of Industry and Trade (MoIT) report last year showed that the localisation rate of this industry was only 7-10 per cent in 2019, which is much lower than the target of 45 per cent by 2025. In addition, the local automobile industry has not been able to invest in core and high-tech products such as engine production and transmission systems.

Meanwhile, the Vietnamese government is making efforts to enhance the development of the supporting industry and the latest move is the issuance of Resolution 115. The industry is expected to develop through the mobilisation of resources of all economic sectors, especially foreign-invested enterprises (FIEs) and domestic counterparts.

Besides that, the governments of South Korea and Vietnam plan to continue working together in order to support investment and trade activities for enterprises on both sides. In December 2020, the two governments signed a business agreement with representatives of the South Korean Ministry of Trade, Industry, and Energy, the MoIT, LG Electronics, Hyundai Motors, and POSCO in attendance.

The agreement is to provide technical consulting for Vietnamese material, component, and equipment suppliers and build closer ties in terms of mutual supply and demand.

Based on this, VITASK was established with the goal to help domestic enterprises improve their competition capacity to participate in the global value chains. Only then can local enterprises build up the foundation for sustainable development.

The centre is expected to promote a technical assistance programme with South Korean consultants to help Vietnamese businesses solve technical problems at the production site, engineer training courses for students, supporting product performance assessment, error analysis, promoting technical exchanges between Vietnamese and South Korean businesses.

Its purpose is to further promote bilateral cooperation in the field of industrial materials, equipment, and components and for South Korean companies to join Vietnam’s national projects.

What are the criteria to select the enterprises receiving VITASK support?

VITASK is an international cooperative official development assistance project run by the Vietnamese and South Korean ministries, thus enterprises will not have to pay a fee.

However, the financial fund of the project is limited, thus, in order to ensure the highest effectiveness we will implement the programme in the north only. The enterprises only need to submit dossiers and wait for our appraisal.

Regarding the criteria, we will select enterprises based on their business realities, the capacity to receive technical support, and the determination of leadership teams in reforming their operations. The latter is essential because it takes a long time to see the benefits of this technical support and it also takes consecutive improvements, which requires their patience.

The project’s targeted objects are small- and medium-sized enterprises and we will focus on areas that involve many skilled engineers.

We received around 40 dossiers thus far. We are implementing project appraisal and will visit manufacturing facilities in February. In March, the list of eligible candidates will be determined and we will start to implement the supporting programme.

The project is to be implemented over five years to support 60 enterprises. Each year, we will select 12 candidates, including six in the automotive sector and six in the electric-electronic industry, to receive technical support.

Could the project eventually expand to support more than 60 companies?

Sixty is not a small number compared to the project’s scale because it is a deep and thorough supporting programme, which will help enterprises deal with their internal problems, including lowering the amount of defective products and increasing production capacity on existing manufacturing lines.

I know that numerous domestic enterprises invested much money in modern machinery but these facilities’ production capacity is not as high as the design, and they still cannot become first-tier vendors for large-scale groups due to failure to meet strict requirements in terms of quality.

We will study the demand and manufacturing capacity of each business and then design particular supporting schemes for them. VITASK’s experts will accompany enterprises on average for 2-3 years with several supporting phases each year.

In some cases, VITASK will even work with enterprises for up to five years. Along with the intensive supporting programme, VITASK is willing to advise and consult enterprises with general problems.

How do the training programmes for university engineers and technical consultant experts work?

The centre will train engineers and professional technical consultants while running material and component performance assessment programmes for Vietnamese companies. The training project is implemented at Hanoi University of Industry with the support of experts coming from Korea Polytechnic University.

Hanoi University of Industry has a lot of international cooperation experience, including cooperation programmes with companies, groups, colleges, and universities from South Korea, thus it is the right selection for VITASK.

After finishing the training courses and earning certificates, students and experts will be confident in what they have learned from large-scale groups as well as enterprises listed in VITASK’s supporting project thanks to solid specialist knowledge. Besides that, VITASK will be a bridge to connect supply with demand from the South Korean side.

There are, of course, major South Korean groups in Vietnam such as Samsung, LG, and Hyundai. How does VITASK mobilise these powerful sources in its supporting project?

Numerous South Korean groups, for example Samsung, plan to increase the localisation ratio. This group will expand the programme to high-tech industries, helping local firms to produce sophisticated electronic parts and be part of Samsung’s global supply chain for high-tech products.

In addition, local carmaker Truong Hai Auto Corporation has been producing and distributing South Korean brand names like Kia. In order to prolong these cases, the centre and the groups will cooperate with each other to determine items that they want to localise and then look for vendors to support them to increase the production capacity.

After parties reach a compromise on models, selling prices, and the quality of products, VITASK will start to implement the supporting programme so that domestic manufacturers can meet their partners’ requirements.

However, increasing the localisation rate is still a big challenge, especially for automobile makers in Vietnam as the country has a modest car market and poor supporting industries. Thus, domestic manufacturers need to improve their know-how in technology and mass production to offer competitive prices at home and abroad.

It will be difficult to become a first-tier vendor in a short time, however, opportunities will come with technical improvements.

How will effectiveness of the programme eventually be measured?

The largest target of VITASK is to create a solid and sustainable ecosystem to help domestic manufacturers penetrate into the global supply chain in terms of the automotive and electric-electronic industries.

It is difficult to measure the capacity to establish the industrial ecosystem or sustainable development via specific figures, thus, after finishing the programme, the centre will survey to collect the opinion of enterprises, as well as indirectly measure via calculating the number of domestic vendors for global groups.

We believe in the programme’s success because there are precedents about similar supporting models, including support from Samsung. The group created opportunities for six enterprises to showcase their performance after finishing a three-month process with Samsung experts. The consultancy with South Korean experts helped enterprises improve their production process and meet the criteria for supplying products and components to Samsung factories, with products’ error ratio decreasing by an average of 25 per cent and production capacity increasing by 30 per cent.

Dang Dinh Thinh – Senior engineer, JAT Autoparts and Industrial Equipment Production JSC The company has undertaken two supporting programmes, a three-month Samsung productivity enhancement and a six-month World Bank engineer training opportunity. These programmes created stepping stones for businesses to more quickly reach product quality standards in the global supply chain. After being assisted by Samsung experts in applying new production solutions, JAT overcame 73 technical errors in production, improved 15 per cent of manufacturing productivity, and increased warehouse area utility. During the training scheme, we had opportunities to work directly with experts from South Korea at the workshops and they issued average training density, thus, we had enough time to acquire knowledge and put it into practice. The World Bank project, running currently, is focused on improving the capacity of the engineering team. It is only a pity that we have had to learn online because of the COVID-19 pandemic. These examples show the importance of supporting programmes from international groups and organisations. The VITASK course could be useful for supporting enterprises in general and JAT in particular. Tran Thi Thu Trang – CEO, Hanel Production and Import-Export JSC We always aim to be the leading Vietnamese enterprise in processing and providing electric-electronic components. In order to realise this target, studying is important. Over 15 years of working with international partners have given us precious experience, prestige, and high precision for even the smallest things. One of the courses that personally impressed me with its effectiveness is Keieijuku – a Japanese-style business management programme which covers a wide range of aspects, from business philosophy and personnel to business strategy and production management. The 10-month course focuses on providing participants with the opportunity to learn and acquire practical knowledge and tools for business administration. Learners can also create links with Japanese enterprises during and after their time in Japan. The knowledge they got from the programme helped enterprises renovate and improve their business and production efficiency, gradually reaching Japanese standards. The VITASK scheme is a useful programme for domestic enterprises. Because they will have opportunities to work with experts from South Korea, they will understand these companies’ work style as well as their requirements and then adapt. Nguyen Xuan Tan – CEO, Smart Tech Vina Co., Ltd. Smart Tech Vina was honoured to be one of the companies participating in Samsung’s productivity enhancements. After the three-month course, we reported numerous enhancements in terms of productivity and product quality, and created a better working environment for employees. From practical experience, methodical training is extremely important and brings much higher efficiency compared to going into reform on the company’s own back. Some years ago, the leadership team bought some curricula themselves to study and apply to the company, however, the efficiency was low because these curricula offer general theories, and the specific examples did not match our specific situation. Moreover, we had to evaluate the results ourselves, which makes it very subjective. Meanwhile, at Samsung’s supporting programme, we had the opportunity to work directly with experts, thus any problems that arise are resolved quickly. It is easy to see that the domestic supporting industry is young and the leadership teams are often young too, thus capacity and experience is limited. South Korea’s development history of the supporting industry is long and Samsung in particular has 50-60 years of experience in this sector. Thus, they can immediately see the mistakes and unreasonable inefficiencies in the manufacturing process. This advantage will contribute to helping domestic enterprises shorten the migration roadmap. The representative of the Ministry of Industry and Trade contacted the company to introduce the VITASK project.Our taskforce has enhanced its manufacturing operation based on initial guides and achievements of the Samsung programme, so we will consider joining the course in the next few years. Currently, Smart Tech Vina is a partner of Samsung and over 30 satellite vendors. The company targets to become vendors for LG, Luxshare, and domestic groups including Viettel, among others.

By Oanh Nguyen