
The explosion in motorcycle use across Vietnam in the last decade has been dramatic. Scores of local and foreign-invested manufacturers are now racing to corner the market.
Motorbike producer Honda Vietnam plans to consume a record one million motorbikes this year for the first time since it established a production base in Vietnam.
Its ambitious target is within reach with 700,000 motorbikes sold last year.
Despite its lofty goals, Honda Vietnam is feeling the heat from domestic market rivals, such as Yamaha, Suzuki, SYM and Lifan.
In a recent move to strengthen its competitive capability, Yamaha Motor Vietnam increased its investment capital by $42.8 million to $123 million to expand productivity.
Yamaha Motor Vietnam marketing director Dinh Ngo Tuan said that the company wanted to exploit the fertile domestic market.
Suzuki, SYM and Lifan are also sharpening strategies to increase investment capital along with diversify models to catch customers’ eyes.
It is estimated that 2.5 million more bikes will be sold this year, a 20 per cent increase against last year with foreign-invested motorbikes firms leading the market with a 70 per cent market share.
Figures released by the National Traffic Safety Committee (NTSC) last year reveal that Vietnam had 18.1 million registered motorcycles and 1.02 million registered automobiles on the roads. That is six time more motorbikes and four times more automobiles on the streets than in 1990.
Studies of Hanoi and Ho Chi Minh City urban planning by the Ministry of Transport and the Japan International Cooperation Agency (JICA) confirm that motorcycles are the dominant mode of transport in large cities.
In 2006, motorcycles served 65 per cent (Hanoi), and 80 per cent (Ho Chi Minh City) of travel needs, while cars made up just 4 per cent (Hanoi) and 6 per cent (Ho Chi Minh City).
“Clearly, the motorcycle is the preferred choice of urban population, providing personal mobility in relatively short distances and frequent trips, under the condition that public transport is underdeveloped, car prices are too high for the general public and motorcycles often travel faster than automobiles,” the study stated.
Nguyen Anh Nam, an expert at the Industry Policies and Strategies Research Institute, under Ministry of Industry (MoI), said that in next 15 years, the volume of motorbikes would double.
“There will be 31 million and 35 million motorbikes in circulation by 2015 and 2020, respectively,” he said, adding that currently there were around 18 million bikes in circulation and the average annual turnover of local motorbike assemblers was between $1.2 and $1.4 billion.
Although the master plan for transport infrastructure in Hanoi and Ho Chi Minh City to 2020 prioritises investment in transport infrastructure such as roads, railroads, subways, and public buses, it also foresees motorcycle use in Hanoi and Ho Chi Minh City will remain relatively high in the future.
At present, the geographical distribution of motorcycle use is not uniform within Vietnam. In absolute volume, the registration and circulation of motorcycles are concentrated in cities and provinces with a large population or a dynamic economy.
“In terms of density of use, Hanoi and Ho Chi Minh City again lead the nation with one motorcycle for every two persons, followed by Danang, Binh Duong, Dong Nai, Quang Tri, Ba Ria-Vung Tau and Khanh Hoa, where there is at least one motorcycle for every four persons,” according to the NTSC.
All other cities and provinces have less motorcycles per person.
A survey just released by the Vietnam Development Forum (VDF), a joint cooperation project between the Japan National Policies Research Institute and Vietnam National Economic University, stated that prior to 1995 Vietnam had a relatively small motorcycle stock in use, at about three million units most of which were imported.
Between 1995-1999, foreign motorcycle assemblers invested in Vietnam and began production, at first using imported parts but gradually increasing parts localisation.
Consumers’ demand for motorcycles increased annually. However, production volume remained relatively low during this period and prices were high in comparison with the income level of most people.
By 2000, local motorcycle assemblers suddenly increased, producing motorcycles with parts originating mostly in China at affordable prices.
From 2000 to 2003, this type of motorcycle occupied as much as 60-70 per cent of the domestic market. In response, FDI enterprises adjusted business strategies and changed models to regain market share.
Some FDI producers introduced popular, low-priced models while other FDI producers targeted up-market buyers with fashionable styles.
At the same time, people’s living conditions continued to improve. As a result, motorcycles in use increased rapidly by about two million units per year, except in 2003 when Hanoi and Ho Chi Minh City applied policies to limit the number of motorcycles.
From around 2003 to present, motorcycle demand continued to expand strongly, with market shares shifting decisively back to FDI assemblers.
Apart from robust income growth, motorcycle demand has been fuelled by the removal of suppply-restrictive measures such as parts import quotas (2002-2005).
By 2006, Vietnam’s motorcycle market reached nearly two million units per year, with an expectation of further future expansion.
“This domestic demand size is sufficient for major assemblers to aggressively introduce new models and for parts suppliers to willingly invest in Vietnam,” Kenichi Ohno, VDF’s director said.
“Now, with a domestic market of two million units per year, motorcycle assemblers will have many business options including the broadening of market segments with new models and reorganising domestic and global suppliers,” he said.
The VDF has just completed the draft on motorbike industry development and submitted to the Ministry of Industry for taking into consideration.
“The Vietnamese Government does not have to worry about the competitiveness of major producers, since motorcycle production in Vietnam is dominated by FDI assemblers with high technology and global reputation,” Ohno said.
He added that the government had to be engaged in close dialogue with them to compile and revise policies, but there was no need to dictate their production, investment, marketing, export or research and development activities.
The VDF’s proposal stated: “Instead, supply-side policies should be mainly directed to the promotion of supporting industries and industrial human resources, which improves local capability and indirectly helps FDI assemblers, and additionally to reorganise or streamline Vietnamese assemblers.”
It added: “Apart from supply-side policies, people oriented policies to improve motorcycle use, as discussed above, are extremely important in the case of motorcycles, since motorcycles have great impact on the general welfare of Vietnamese people.
(Source: VIR)