Auto Industry Update 2020

Previous reports:

Auto Industry Update 2019

Auto Industry Update 2018 (link not available)

Auto Industry Analysis 2017

1. Recent developments

1.1. Market growth

In 2019, sales of automotive in Vietnam increased by 11.7 percent, hitting 322,322 vehicles
(VAMA, 2020).

Vietnam’s automobile sales (vehicles), 2018 - 2019

322,322
288,683

2018 2019

Source: VAMA, 2020

Auto Industry Update 2020 – v1 – 06/02/2020

1.2. Market segmentation
Passenger cars accounted for 73.6 percent of total vehicle sales in 2019, followed by
commercial vehicles (24.8 percent), and special-purpose vehicles (1.6 percent) (VAMA, 2020).

Vietnam’s automotive by vehicle types (%), 2019

1.6%

24.8%

73.6%

Passenger cars Commercial vehicles

Special-purpose vehicles

Source: VAMA, 2020

1.3. Imports
Last year, Vietnam imported 140,301 vehicles, valued at $3.16 billion USD (Vietnam's Customs,
2020). Automotive imports expanded sharply in 2019, registering 69.3 percent volume growth
and 73 percent value growth. This was a huge contrast with 2018, when automotive imports
declined substantially due to Vehicle Type Approval (VTA) (Decree No. 116/2017/NĐ-CP, 2017).
One explanation was that car manufacturers have figured out ways to adapt to VTA. They also
took advantage of ASEAN Free Trade Area Agreements (ATIGA), which eliminated auto import
tariffs from ASEAN. In fact, Vietnam mostly imported cars from Thailand and Indonesia.

Auto Industry Update 2020 – v1 – 06/02/2020

 Vietnam’s auto imports (vehicles, bn USD), Vietnam’s auto import sources (%),
2018 – 19 2019
160,000 3.50
140,301
140,000 3.00
3.16
120,000
2.50
100,000 31.9%
82,865 2.00
80,000 48.3%
1.83 1.50
60,000
1.00
40,000
19.8%
20,000 0.50

0 0.00
2018 2019

Volume (vehicles) Value (bn USD) Thailand Indonesia Others

Source: Customs, 2020

1.4. Competition
In 2019, the domestic automotive market continued to be led by Thaco, Hyundai, Toyota, Ford,
and Honda. Interestingly, Mitsubishi emerged to be a major player, thanks to dramatic sales
growth of 198.1 percent last year. In 2019, Ford, Hyundai, Honda, Toyota witnessed positive
sales growth, whereas Thaco experienced slight decline in sales.

Auto Industry Update 2020 – v1 – 06/02/2020

 Vietnam’s top 10 auto companies (vehicles), 2018 - 19

96,127
91,710
79,568 79,328

63,526 65,856

32,175 33,102 30,642

24,636 27,099
8,333 5,118 12,334
10,278 11,786
6,897 7,375 6,790
2,657

Thaco Hyundai Toyota Ford Honda Mitsubishi Suzuki Isuzu Do Thanh Chevrolet

2018 2019

Source: VAMA, 2020. Thaco assembles cars for Mazda, Kia, Peugeot, and produces trucks and buses.

Last year, the best-selling car model was again Toyota Vios. Mitsubishi Xpander surged to be
the 2nd most popular model. Hyundai Accent, Hyundai Grand i10, and Mazda3 were in the top 5.

Vietnam’s top 10 auto models (vehicles), 2018 – 19

27,180
27,188

22,068
20,098 19,719
18,088
13,761
13,446 13,337 13,319 12,667 14,581 11,313
12,537 11,782 12,164 11,678
8,819
6,035

990

Toyota Mitsubishi Hyundai Hyundai Mazda3 Honda CR- Ford Toyota Toyota KIA Cerato
Vios Xpander Accent Grand i10 V Ranger Fortuner Innova

2018 2019

Source: VAMA, 2020

Auto Industry Update 2020 – v1 – 06/02/2020

1.5. VinFast
As an automotive business of Vingroup, VinFast officially launched three car models in 2019,
including a hatchback, a sedan, and a SUV. Last year, VinFast received orders for 17,214
vehicles (VinFast, 2020) . In 2020, VinFast is going to introduce a luxury car and two crossover
models. It plans to export electric vehicles to the U.S from 2021.

Thanks to European support, VinFast has developed its cars quickly (Nikkei, 2019). It used BMW
technology for the chassis. It also cooperated with other companies, notably Robert Bosch
(Germany), to manufacture parts.

Also in 2019, VinFast tied up with ride-hailing company FastGo to finance for 1,000 drivers who
purchase VinFast cars (Nikkei, 2019). Drivers were allowed to buy VinFast Fadil with an upfront
payment of 20 percent of the car price. VinFast was also reported to discuss with the
government about purchasing and leasing VinFast cars. The government’s car fleet mostly
consists of Toyota and other foreign brands.

Vingroup has divested stakes in other businesses to fund VinFast. In December 2019, Vingroup
exited supermarkets and convenience stores (Nikkei, 2020). Shortly after that, Vingroup closed
its appliance store chain. In January 2020, Vingroup withdrew its plan to enter Vietnam’s
aviation.

1.6. Other updates

Recently, the auto market witnessed increase in investment. In January 2020, Ford announced
it would invest $82 million USD to upgrade its factory in Vietnam (CafeF, 2020). Based in Hai
Duong, the factory’s annual capacity will increase from 14,000 to 40,000 vehicles. In May 2019,
Thaco launched a $200-million-USD plant in Chu Lai (Quang Nam Province), which had an
annual capacity of 20,000 vehicles (EIU, 2019). The plant will assemble Peugeot cars and may
manufacture BMW vehicles.

Auto Industry Update 2020 – v1 – 06/02/2020

To promote sales, some auto manufacturers offered big discounts in 2019 (Dan Tri, 2019). For
example, BMW slashed the price for 3 Series and 5 Series models by $4,292 - $12,876 USD
(VND/ USD = 23,300). Thaco cut the price for Mazda CX-5 and CX-8 by $2,146 - $2,575 USD. The
price of Toyota Fortuner (diesel version) fell by $4,292 USD.

Last year, prominent brands of luxury cars and sport cars entered Vietnam (Dan Tri, 2019). In
March 2019, Aston Martin opened its first dealership in Ho Chi Minh City. In August 2019,
Ferrari began to provide maintenance services in Ho Chi Minh City. At the end of 2019,
McLacren said that it would expand its presence to Vietnam.

In 2019, the government increased the stamp duty for pick-up trucks to 60 percent of the duty
for passenger cars (VNExpress, 2019). It was a roughly three-fold increase.

2. Outlook

KITA expects Vietnam’s automotive sales to grow by 10 percent in 2020. Industry drivers
include low automotive penetration, large and young population, improving income, and rapid
urbanization.

In 2020, the government plans to revise Decree No. 116/2017/NĐ-CP on automotive

manufacturing, assembling, importing, and business. The conditions for auto imports are
expected to be loosened (Vietnam News, 2019). Accordingly, the current inspection for each
batch of imported vehicles might change to type of vehicles. Also, the inspection of imported
automobiles is likely to shift from pre-inspection to post-inspection.

Auto Industry Update 2020 – v1 – 06/02/2020

3. Implications for Korean companies

Korean companies benefit from Vietnam’s thriving automotive sector. Apart from
manufacturers like Hyundai and KIA, Korean part manufacturers also gain. In 2019, Vietnam
imported $1.15 billion USD of automotive parts from South Korea, an increase of 39.3 percent
compared to 2018 (Vietnam's Customs, 2020).

In 2019, Hyundai Motor surpassed Toyota to be the 2nd largest automotive manufacturer in
Vietnam. Hyundai Motor currently operates a joint venture with Vietnam’s Thanh Cong Group.
The success of Hyundai Motor prompted its subsidiaries to enter Vietnam.

 Hyundai Card: in 2019, Hyundai Card announced it would expand into Vietnam (The
Korea Times, 2019). The credit card business of Hyundai Motor already acquired a 50
percent stake in Vietnam’s Finance Company Limited for Community (FCCOM) for $41.9
million USD. FCCOM is a personal loan subsidiary of Vietnam’s Maritime Commercial
Joint Stock Bank. Hyundai Card plans to offer auto loans, credit cards, and corporate
financing in Vietnam. It aims to conduct joint marketing with Hyundai Motor and Kia
Motor.

 Hyundai Glovis: established a company in Vietnam in 2019 (The Korea Times, 2019). The
entity will provide auto parts to manufacturers in Vietnam, including Hyundai Motor. It
will also offer “logistics for non-automotive imports and exports”.

 Hyundai Capital: considered “setting up an auto credit financing unit in Vietnam” (The
Korea Times, 2018). The possible move was consistent the company’s long-term
strategy in South East Asia.

Auto Industry Update 2020 – v1 – 06/02/2020

Abbreviations

CBU Completely Built-Up

CKD Completely Knocked-Down

EIU The Economist Intelligence Unit

SUV Sport Utility Vehicle

VAMA Vietnam Automobile Manufacturers Association

VTA Vehicle Type Approval

Auto Industry Update 2020 – v1 – 06/02/2020