Dreaming big, investors pour trillions of dong into automobile factories
October 9, 2020
The Vietnamese automobile market is full of potential with predicted sales of up to 1.8 million products a year, but it still remains risky to invest in the industry.
Thanh Cong Group and Hyundai Motor organized a groundbreaking ceremony to kick off the construction of a new factory in Ninh Binh.
The factory, capitalized at VND3.2 trillion, covers an area of 50 hectares in Gian Khau IZ and has designed capacity of 100,000 products a year. It will use modern technologies and put out models meeting Euro 5 and Euro 6 emission standards.
Thanh Cong has also started a project on an automobile supporting industry complex in Quang Ninh. Its CEO Le Ngoc Duc said the complex will gather many enterprises that make automobile parts, especially high-tech content for domestic automobile production and export.
Ford Vietnam has completed the upgrading and expansion of its factory in Hai Duong which has the capacity of 40,000 products a year, with investment capital of VND1.9 trillion.
In late 2019, Thaco made an investment to raise the capacity of Kia manufacturing factory from 20,000 to 50,000 cars a year. Prior to that, in early 2018, Thaco opened the Mazda manufacturing factory (50,000 products a year in the first phase).
In Chu Lai Open EZ in Quang Nam, Truong Hai has 12 car part manufacturing factories, with products for domestic consumption and export.
In mid-2019, VIngroup completed the first phase of VinFast automobile factory in Hai Phong, which can put out 250,000 products a year.
Analysts say that enterprises have been making big investments in automobile projects because they see the market has great potential.
The Ministry of Industry and Trade (MOIT) predicted that 750,000-800,000 products could be sold a year by 2025 and the figure would be 1.7-1.85 million by 2035.
Though the market has high potential, because of rapidly developing middle class, automobile manufacturers are facing big challenges.
More and more imports are arriving in Vietnam thanks to the import tariff of zero percent and simpler procedures. Because of high production costs, domestically made products are less competitive than imports in price.
Toyota Vietnam has resumed the assembly of its Fortuner model in Vietnam, but sales are unsatisfactory. Meanwhile, VinFast said it has incurred the loss of millions of dong for every car sold, and reported a loss of VND6.6 trillion in H1.
The government has committed to promote the development of the automobile industry with new policies, and automobile manufacturers are still waiting.
In the latest news, the government has asked the Ministry of FInance (MOF) to amend the luxury tax policy and submit the draft policy to the National Assembly in October.
Manufacturing automobiles is a costly game
Automobile manufacturers usually incur a loss for the first 5-10 years of operation, but some of them have had to give up the game because they could not afford the high costs.
Local automobile manufacturers look forward to big preferences
What should automobile manufacturers do – import cars for domestic sale or assemble cars domestically? They prefer the second solution, though the first brings higher profit.