Larger foreign investment
Despite sluggish trading at motorbike agents, Honda Vietnam (HVN) has recently poured over US$120 million into expanding its production capacity. The company has announced it will build a third motorbike manufacturing plant with output of 500,000 units each year after launching a second into operation.
HVN started motorbike production in 1997 and gradually scaled up its production to reach a capacity of two million units in 2011. It expects to launch the third plant into operation next year to bring its total output to 2.5 million bikes yearly.
According to HVN, the third plant will help meet increasing demand for motorbikes in the country. In 2010, HVN sold 1.7 million bikes and is expected to sell 1.9 million bikes for local consumers this year. Therefore, larger production scale is necessary now.
In Vietnam, motorbikes remain the most popular means of transport for residents and the market is expected to grow further in the near future.
Renowned European scooter producer Piaggio has also boosted investment in Vietnam, although it only started tapping into the market in 2007. After completing its first plant with an annual capacity of 100,000 units, Piaggio Vietnam is building a second plant to increase its total output to 300,000 scooters. Piaggio has invested around US$30 million in the project.
Like HVN, Piaggio is trying to meet increasing scooter demand in Vietnam and other nations in Southeast Asia. Vietnam last year became the fourth largest motorbike market worldwide after China, India and Indonesia with 2.69 million bikes being consumed, a 20% year-on-year increase. The local market is more attractive now as the other nations have limited uses of motorbikes.
Meanwhile, Taiwan’s SYM Group, the first foreign motorbike maker in Vietnam, raised its output to around 200,000 bikes last year. Japan’s Yamaha Co. targets to turn out one million bikes in 2011 after producing nearly 600,000 last year.
Some FIEs also have export plans. For instance, Piaggio has decided to establish a research and development center in the country to boost exports to Singapore, Thailand, Laos, the Philippines, Japan and Australia.
Local firms with shrinking market share
In contrast with the strong development of FIEs, domestic motorbike producers see their market share shrinking and have to struggle to survive given the tough competition.
Last year, around 30 domestic bike manufacturers in the country turned out only 47,000 units, accounting for almost 2% of the total output. A decade ago local enterprises made up 80% of the market.
Most domestic firms do not invest in design and thus are failing to secure a strong brand on the market. A number of enterprises have flocked to reap profits by assembling Chinese-made bikes while foreign companies like Honda, Yamaha, Suzuki and SYM have made innovations in design and quality.
As a result, the number of Vietnamese bike firms has dropped from 56 to 30 given the tough competition. HCMC-based Hoa Lam Co, which used to be regarded as a strong bike assembler with the Halim brand, has left the main business despite its cooperation with Taiwan’s Kymco Co.
Technology is not a strong point of local enterprises while there is an increasing trend for energy-saving and environmental-friendly bikes. A representative of a local bike company says that the bike market has fallen into the hands of FIEs as local enterprises have fewer opportunities to survive.
By Le Hoang in HCMC - The Saigon Times DailyBusiness & Investment Opportunities
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