Small cars in Vietnam are ready for battle

No longer the "territory" of Korean cars, the arrival of "newcomers" such as Toyota Wigo and Suzuki Celerio is opening up an exciting competition in the A-class small car segment in Vietnam.

The A-class small car segment in Vietnam is increasingly competitive.

Considered one of the lowest priced cars on the market, but up to now, the A-class small car segment has not had many options for Vietnamese consumers. In the end, KIA Morning or Hyundai Grand i10 are still the two best choices for customers who intend to "shop" for a car with a budget of less than 500 million VND.

Over time, in recent years, two Korean car models have turned the A-class car segment into its own "territory". However, this monopoly is at risk of being broken when newcomers such as Toyota Wigo, Suzuki Celerio with the advantage of importing from ASEAN will flood into Vietnam in 2018, when the car import tax is reduced to 0%.

Rookie advantage

In the context of today's fiercely competitive market, Toyota and Suzuki are quite cautious in bringing small car models such as Wigo and Celerio to the Vietnamese market.

Two Japanese car companies respectively displayed Toyota Wigo and Suzuki Celerio at the Vietnam Auto Show 2017, to survey customer opinions, before officially selling them in early 2018. This move not only gives Toyota and Suzuki more time to adjust their products to meet consumer expectations, but also allows them to monitor market developments before listing their prices in Vietnam.

In addition to the fashionable design with equipment such as positioning lights, LED taillights, 14-inch wheels, Toyota Wigo has a fairly simple interior. The seats are covered with fabric while many details are plastic with manual air conditioning. This model is only equipped by Toyota with a 1.0 liter engine, 65 horsepower capacity, 89 Nm torque. Meanwhile, positioned as a low-cost car, Suzuki Celerio also has a simple design and is equipped with only basic features.

Compared to the Hyundai Grand i10 and KIA Morning, Toyota Wigo and Suzuki Celerio are considered “inferior” to the Hyundai Grand i10 and KIA Morning. However, meeting the basic needs of users along with competitive prices to gain market share... is the goal that Toyota aims for when entering the small car segment that has been left untouched for more than 20 years in Vietnam.

Wigo is assembled by Toyota in Indonesia, while the Celerio production line is operated by Suzuki in Thailand. Both countries have the most developed automobile industries in Southeast Asia, which will create the basis for Toyota Wigo and Suzuki Celerio to achieve a localization rate of over 40%. Thereby, they can enjoy a 0% import tax rate from ASEAN to Vietnam from 2018. This is considered a decisive factor for these newcomers to gain an advantage in the price race compared to their two rivals KIA Morning and Hyundai Grand i10.

Korean cars welcome the battle

Of course, the two Korean car models do not let newcomers like Toyota Wigo and Suzuki Celerio easily take advantage of their price advantage to encroach on the very "lucrative" market share in the small car segment.

Recent moves show that both KIA Morning and Hyundai Grand i10 are ready to face the arrival of imported cars. Previously, Hyundai Thanh Cong switched the new generation Grand i10 from import to assembly at the factory in Ninh Binh. This is considered a rather surprising move, because according to some experts, the current price of cars assembled in Vietnam is 10-20% higher than the price of cars imported from countries in the ASEAN region. Currently, the localization rate of Grand i10 CKD is only at 10%. However, a representative of Hyundai Thanh Cong said that this is a long-term investment of Hyundai in Vietnam. Not only that, this unit has also planned to increase the localization rate of Grand i10 to 40% in the next 3 years to export to markets in the region.

This is clearly a calculated move by Hyundai Thanh Cong, in the context of major policy and market changes. In June 2017, the Ministry of Industry and Trade has just reported on the development strategy of the automobile industry with many proposed solutions to develop this industry. Among them, there is a proposal not to impose special consumption tax on the value created domestically of cars. If this policy is approved by the Government, it will create many competitive advantages for domestically assembled and produced car models such as Hyundai Grand i10.

Meanwhile, Truong Hai (THACO) not only continues to maintain the assembly line but also continuously reduces the selling price for KIA Morning in Vietnam. After reducing by 5 million VND in July 2017, the selling price of KIA Morning continues to decrease by 1 - 2 million VND for each version in August 2017. Currently, KIA Morning is becoming the most attractive car model in the A-class small car segment with a selling price of only 315 - 402 million VND.

In terms of strength, Hyundai Grand i10 is holding the advantage in assembly quality when investing in modern production lines, KIA Morning shows its competitiveness in selling price. Meanwhile, despite appearing as "newbies", Toyota Wigo and Suzuki Celerio are holding advantages when import tax on cars from ASEAN to Vietnam is reduced to 0%.

Each side has its own strengths, but clearly the debut of the "newcomers" is opening up an exciting competition for the A-class small car segment when entering 2018. Thereby, bringing Vietnamese consumers many new options with better prices.

According to TNO