GOOD SIGNS FOR VIETNAM TO EXPORT MOTORCYLCES

Vespa Scooters- Piaggio factory Viet Nam

Vietnam consumes an average of three million motorbikes a year and the number has continuously decreased for the last four years.

Over 3.6 million motorcycles were registered nationwide in 2011, which fell to 3.3 million, 3.2 million and below 3 million in the three following years, reported the Registration Department.

Traffic jam at Thu Duc Dist, Ho Chi Minh City, April 2015

Traffic jam at Binh Thanh Dist, Ho Chi Minh in May 2015

Annual production capacity reaches 4-5 million. Ninety percent of motorbikes sold in Vietnam last year belonged to five giants Honda, Yamaha, Piaggio, Suzuki and SYM–member of Vietnam Association of Motorcycle Manufacturers (VAMM). The rest ten percent went to other domestic manufacturers.

Experts forecast that the motorbike market this year will continue facing many difficulties, challenges and fiercer competition. Consumption is predicted to reduce to 2.7-2.8 million.

Manufacturers have introduced many new designs and versions to maintain and broaden their market shares. Last year, the top five companies launched over 20 new versions. Meantime shops have provided promotional programs and discounts but still failed to increase their sales.

The motorcycle assembly workshop of Piaggio Vietnam Company.

Installing the electrical system- Piaggio Vietnam Company.

Motorcycle frame producing workshop of Piaggio Vietnam Company.

Many shops have fallen in unsold condition and were forced to close down.

In a transport industry’s plan by 2020, the number of motorbikes will approximate 36 million. Still, a latest data showed it had already totaled 43 million by the end of 2014, seven million higher than the Government-approved plan.

Ho Chi Minh City alone has 7 million registered motorcycles excluding those from other provinces.

Big cities including HCMC and Hanoi have strongly invested in trafficinfrastructure. However traffic jam and accidents have still beenpermanent issues.

Amid weak infrastructure and the slow development of satellite urban areas, experts worried that if the number of motorbikes continues increasing, it will hamper socioeconomic development and investmentenvironment.

Therefore, traffic plans will comprise various administrative, economic and technical measures to limit private vehicles, leading basically change urban appearance.

Motorbikes will mainly be used in rural areas where public transport has not developed.

Deputy Minister of Transport Le Dinh Tho said that the ministry has proposed the Government to develop the motorbike industry in accordance with sustainable ways. Of these, private vehicle restriction and public transport development are big issues, concerning manufacturers.

At a meeting with leaders from the Ministry of Transport in mid 2014, director general of Honda Minoru Kato said that the restriction would put more pressure on the Government to develop public transport, affecting the industry’s annual contribution rate to the country’s Gross Domestic Product and Vietnam’s motorbike export.

Manufacturers have been forced to seek ways to boost exports, which is considered as a survival factor to prevent the worst scenario of plant shutdown or production scale shrink.

Many producers have already started exporting their products, mostly to other Asian markets and buyers in Africa. Data from the Vietnam General Department of Customs showed that the export value of transport vehicles, mostly motorbikes, produced in Vietnam rose 32.2% last year to $4.6 billion, accounting for 4% of Vietnam’s total export revenue.

Honda Vietnam Co., Ltd., the largest motorbike maker in the country by output, said earlier this year that its third factory in Vietnam is scheduled to start production by the end of December. As part of its production strategy, it said it is seeking to boost exports to markets in Europe or Asia – the company already exports its products to Japan, Laos, Malaysia, Cambodia, the Philippines, Pakistan and Italy.

“Exporting is good not only for Honda, but also for Vietnam… and we will focus on the production of our best-selling models in Vietnam for export, including our SH and LEAD models,” said Masayuki Igarahi, director general at Honda Vietnam.

Although the company introduced several new models and launched new sales promotion campaigns, Honda said its sales in Vietnam fell by 4% last year to 1.97 million units.

The company declined to provide its export target for this year, as well as exports figures for previous years. But Mr. Igarahi said Honda Vietnam aims to export around 12,000 125-cc LEAD motorbikes a year to Japan.

Italian scooter producer Piaggio Vietnam Co. was targeting other Asia-Pacific markets for sales from the moment it entered Vietnam in 2009 with a production base in the northern province of Vinh Phuc.

“We have already exported scooters from Vietnam since our start-up in the country,” said Costantino Sambuy, chief executive of Piaggio Vietnam Co., Ltd. “This has always been our strategy, with Vietnam as the regional hub, which hosts the only factory in the whole [Association of Southeast Asian Nations] region, to which we export products.”

To keep doing so Piagio said it is expanding its investment to boost its production capacity.

“The current expansion we are focusing on now is the ‘vertical expansion’, meaning that we look to increase the technological capacity in the areas of research and development and engine production,” Mr. Costantino said.

 The motorbike industry has increased localization rate to 90 percent. This is an advantage for manufacturers in Vietnam to compete in their rivals in prices in both local and oversea markets.

According to a motorcycle industry development plan by the Ministry of Industry and Trade for the phase 2016-2020, motorbikes and accessories’ exports will yield US$500-800 million by 2020.

Ref source: Vietnambreakingnews, blog.wsj