09:40 | 15/11/2018 Companies
(VEN) - Football legend David Beckham kicked off the international debut of the first two made-in-Vietnam cars at the Paris Motor Show last month, scoring a goal for the Vietnamese auto industry.
A new value chain
VinFast Manufacturing and Trading Company Limited, a subsidiary of the private Vietnamese conglomerate Vingroup, unveiled an SUV and a saloon, described as Italian in design, with European technology and “Vietnamese spirit”. Future plans call for the manufacturing of electric cars, buses and motorbikes.
Unlike other auto manufacturers in Vietnam that form part of existing value chains, VinFast has created a value chain of its own with the participation of world-leading carmakers.
Its global partners include Siemens, Bosch, Magna Steyr, AVL, Pininfarina, and German Industry and Commerce Vietnam.
The Vietnamese carmaker has hired automotive industry experts of global repute, including Vo Quang Hue, former general director of Bosch Vietnam, James Deluca, former executive vice president of General Motors (GM), and Dave Lyon, GM’s former director of design.
Economist Vu Dinh Anh says Vingroup is confident of its ability to create this breakthrough based on its internal strength and favorable external conditions. He said VinFast represents Vietnamese companies capable of creating and leading global value chains with the participation of world-leading brands.
“Only those with high entrepreneurial spirit who are willing to accept risks dare invest in sectors and fields where they have to compete with world-leading brands, such as Toyota, BMW, Mercedes and Honda,” economist Pham Chi Lan said.
Automotive industry experts consider VinFast’s cooperation with BMW a daring decision. Had it cooperated with another partner not among world-leading automakers, VinFast would have had to pay lower costs and been offered easier access to technology. However, VinFast has chosen BMW, reflecting not only its financial potential but also its aspiration for sustainable development and a long-term vision.
The strategic choice also reflects the stature of the Vietnamese auto brand. Instead of becoming an auto assembly professional, VinFast has chosen to become the leader of a whole value chain to create international-standard Vietnamese cars.
Le Duong Quang, President of the Vietnam Association for Supporting Industries and former Deputy Minister of Industry and Trade, believes VinFast’s daring and determination have strengthened public trust in a bright future of the Vietnamese automotive industry.
“VinFast has not got into a rut when creating a new auto brand. It has taken a professional approach by making use of the global automotive industry’s achievements to build its own value chain. VinFast’s success shows the Vietnamese automobile sector’s capability to capture a firm position among other industries in Vietnam,” Le Duong Quang said.
Opportunities for Vietnamese business
Vietnam expected foreign investment projects to help it develop various sectors, especially support industries, in order to increase the local content of high-tech products. However, the expectation is yet to be fulfilled.
Most foreign-invested projects in the automobile sector focus on assembly and outsourcing services, yielding low value. This also leaves domestic companies behind in experience and operational capability, preventing them from meeting high standards. Instead of helping Vietnamese companies improve, foreign businesses still depend on external suppliers.
The domestic automotive industry cannot develop if it only depends on assembly, while opportunities for domestic companies to participate in supply chains are limited.
In order to grow, Vietnamese businesses should take the initiative in manufacturing as VinFast has done.“Manufacturing a new automobile is a midstream project. Manufacturing details with high technological content and added value is going upstream,” said Vo Quang Hue, Vingroup’s Deputy General Director in charge of the VinFast project.
VinFast understands that a support industry network will not only help it achieve local content ratio targets: 60 percent for automobiles and 100 percent for electric motorcycles, but will also enable it to contribute to the sustainable development of the Vietnamese automotive industry.
The Vietnamese auto firm has used 30 percent of the area of its manufacturing complex in the city of Hai Phong’s Dinh Vu-Cat Hai Economic Zone to build support industry facilities. Le Duong Quang believes this will create opportunities for domestic suppliers to join the value chain of Vietnamese-owned international-standard products.
“The growth of VinFast will contribute to the development of Vietnamese support industries and pave the way for their presence in the global market,” the president of the Vietnam Association for Supporting Industries said.
VinFast products also reflect its aspiration to contribute to the development of other domestic businesses, as well as to the growth of the entire Vietnamese economy.