Vietnam and the opportunity to become ASEAN's vehicle manufacturing center

Many international car brands are looking to turn Vietnam into the "center" of car exports in Southeast Asia.

Hyundai Grand i10 assembled in Vietnam. Photo: HTC.

According to a newly published report by BMI Research (part of Fitch Group), Vietnam will become the second fastest growing auto manufacturing center in Southeast Asia in the 2017-2021 period, after the Philippines.

Specifically, production from the Philippines climbed 300% to 359,000 vehicles, while Vietnam could double its production to 112,000 vehicles during this period. Vietnam's growth rate will be one and a half times that of Indonesia and twice that of Thailand.

Data source: BMI Research, Bloomberg.

The Financial Times reported that French carmaker PSA - which owns the Citroen and Peugeot brands - and South Korean carmaker Hyundai Motor are looking for ways to boost production in Vietnam for export to Southeast Asia.

In particular, Hyundai Motor, in cooperation with Hyundai Thanh Cong, has taken the first steps to realize the strategy of turning Vietnam into an export center by assembling the small car model Grand i10 in Ninh Binh.

At the recent launch ceremony, a representative of Hyundai Thanh Cong said that the target sales of the car in the first phase is up to 3,000 cars/month, including both domestic and export. In 2016, the domestic sales (unofficial) of the Grand i10 was about 18,000 cars, or an average of 1,500 cars/month.

In the coming time, this unit will continue to assemble Tucson - a 5-seat crossover model instead of importing. This distributor's great ambition is to achieve a ratio of domestically assembled cars of 70-80% (the number of cars sold in Vietnam) this year to increase this number to 90% in 2018.

Meanwhile, with French carmaker PSA, a representative of the company told Bloomberg that Vietnam is a potential market with an increasingly wealthy class, most of whom do not own a car for the first time.

Compared to other countries in the region, the car ownership rate in Vietnam is at the lowest level, according to a survey by the Pew Research Center. Data source: Pew Research Center, Bloomberg.

Another brand that is about to shift its assembly and production to Vietnam is Mazda. Like Hyundai, Mazda does not have any large-scale factories in Southeast Asia. The brand’s sales in the region are growing rapidly, with Vietnam leading the way, according to Mazda.

The plan to turn Vietnam into a regional Mazda production center has been clearly realized by the distributor Truong Hai. The company has started construction of a new Mazda factory in Chu Lai (Quang Nam) with a capacity of 100,000 cars/year, 10 times larger than the current VinaMazda factory.

Mazda’s new factory in Vietnam is expected to produce 50,000 cars per year. Mazda’s domestic sales in 2016 were more than 32,000 cars.

In a related development, the Ministry of Industry and Trade estimates that by 2020, the market size, consumption and production capacity of the domestic automobile industry will surpass that of the Philippines.

To promote the domestic auto industry, the agency has just proposed not to impose special consumption tax on the value created domestically in cars. This is considered an unprecedented incentive for joint ventures or businesses providing auto accessories if approved.

According to Zing