Sign in Subscribe
Transportation equipment industry

Vietnam's Car Industry Gears Up for a Collision Course

Strategic Insights

— 2 min read

Vietnam's government has made a sharp U-turn on its car industry policy, swinging from protectionism to allowing a flood of foreign investors. The result is a rush of new investments, with 11 car manufacturers, including Toyota Motor Corp. and Ford Motor Co., pledging around $650 million in the country. However, the market is tiny, and the resulting auto industry may become the world's most saturated.

The Vietnamese government has approved seven new investments in auto plants in 1995 alone, more than in the previous four years combined. Deputy Industry Minister Nguyen Xuan Chuan explains that the government realized it needed competition to drive growth, and without it, the car industry would stagnate. However, the policy shift has left car manufacturers like Mekong Corp. struggling to adapt to the new rules. Mekong's General Director Naoki Tatebe recalls that the company initially planned a national car project, but reality soon set in, with less than 100 vehicles sold overseas and 1,500 local sales.

Key Takeaways:

  • The Vietnamese government has approved 7 new investments in auto plants in 1995 alone, more than in the previous 4 years combined.
  • 11 car manufacturers, including Toyota and Ford, have pledged around $650 million in investments in Vietnam.
  • The market is tiny, and the resulting auto industry may become the world's most saturated.
  • The government has adopted a policy shift from protectionism to allowing foreign investors.
  • Mekong Corp. has struggled to adapt to the new rules, with less than 100 vehicles sold overseas and 1,500 local sales.
  • Deputy Industry Minister Nguyen Xuan Chuan explains that the government realized it needed competition to drive growth.
  • The government has no limit on the number of car companies it will approve.
  • Potential investors know the sector is crowded but are eager to compete.

Statistics:

  • 11 car manufacturers have pledged around $650 million in investments in Vietnam.
  • 7 new investments in auto plants were approved in 1995 alone.
  • Less than 100 Mekong vehicles have been sold overseas.
  • Mekong's two plants have an annual capacity of 25,000 vehicles but actually produce about 1,500.
  • The Vietnamese government has approved investments from companies like Mercedes-Benz, Daihatsu, Suzuki, Ford, Chrysler, Toyota, and Isuzu.
  • France's PSA Peugeot Citroen and South Korea's Hyundai Corp. are waiting for government approval to invest in Vietnam.

Sources:

  • The Wall Street Journal article "Vietnam's Car Industry Gears Up for a Collision Course" by Reginald Chua, date unknown but referenced on January 1, 1997.

Read more