The launch of two models by Vietnamese automaker VinFast at the 2018 Paris Motor Show earlier this month is seen by experts as a positive sign for Vietnam’s automobile industry, with the company hoped to create a boost for the country’s supporting industry ecosystem as well.
With the debut of its SUV and sedan at the Paris Motor Show VinFast on October 2, the car-making arm of Vietnam's leading property developer Vingroup has ebcome the first Vietnamese automaker to participate in a major international auto show.
The Vietnamese automaker, which was only established last year, has attracted global attention for being able to introduce its products after a short period of time.
Experts have long believed that the right direction to develop the Vietnamese auto industry is to have a Vietnamese brand and an adequate supporting industry ecosystem capable of increasing the local content rate.
VinFast is the first part of the equation, and what’s left to do is to fortify the domestic supporting industry.
According to the Ministry of Industry and Trade, there are currently 358 companies partaking in the automobile industry in Vietnam, including about 50 assembly companies, 45 chassis, body and trunk producers, 214 car accessories manufacturers.
This figure is far behind 2,500 companies producing auto parts in Thailand.
On average, each Vietnamese car assembly company has less than two spare components manufacturers, while making a car needs from 30,000 to 40,000 components.
Therefore, more than 90 percent of auto parts and accessories in the Vietnamese auto-making market are being imported, or supplied by foreign producers with operations in Vietnam.
“The FDI companies in car assembly mainly produce their own spare parts or import them from genuine manufacturers, limiting purchase of these components from domestic enterprises to the minimum,” a representative of the trade ministry explained why there are few Vietnamese car component suppliers.
Concluding from this practice, VinFast realized that one of the challenges to produce Vietnamese car products is to increase the local content rate on the basis of improving the domestic supply of equipment and components.
VinFast thus promptly signed a memorandum of understanding to set up a joint-venture plant for stamping and welding of body parts with AAPICO Hitech Company of Thailand.
This is the first joint venture in VinFast's series of component-making plants to serve its auto-making ecosystem, according to the company.
So far, several partners including the leading names in the field of car manufacturing such as BMW, AVL, Magna Steyr, Bosch, Pininfarina, Schuler, Durr, ZF, Lear, AAPICO have announced cooperation with VinFast.
“With the establishment of joint ventures and key investment for equipment, VinFast will localize almost all the stamping and welding process of body parts [of a car],” a VinFast representative said.
“That is to lay the foundation for increasing the localization rate, and step by step raising the amount of Vietnamese content in car products,” the representative added.
However, Vu Tan Cong, a senior automobile expert, advised that VinFast should also develop a market, which must be large enough, to sell domestically produced car components.
“For the localization plan to be effective, the minimum consumption for each vehicle line must reach 1,500 - 2,000 vehicles per month,” Cong said.
But according to an automobile expert, VinFast can produce up to 25,000 vehicles per year in the inaugural phase, targeting 500,000 vehicles per year in the next phase.
Moreover, the company is targeting not only the domestic but also global markets.
“So market is not a problem that cannot be solved for VinFast,” the expert confidently said.
According to VinFast’s general director James B. Deluca, the Vietnamese automaker chose to cooperate with leading companies in the world in terms of engineering, design, human resource to build a solid foundation.
“We have built up a production process to ensure that our products meet not only the requirements of our customers, but also beyond the expectations of our Vietnamese customers as well as whatever markets we target,” B. Deluca said.