One of the most significant trends in Asean in recent months is the pick-up in light-vehicle sales in Vietnam. Indeed, 2013 annual sales surged significantly by around 28 per cent to 105,000 from a huge slump in the previous year when sales were below 82,
Our assessment echoes that of the local automotive association VAMA, which is reported to have revised its sales target to 125,000, including MHCV. This level of recovery poses both opportunities and challenges for all players in the market. Traditionally, Toyota has been the biggest player with a market share of around 31 per cent in the past five years, followed by Kia with 18 per cent. At the lower end of the ranks, the market is relatively fragmented with six brands competing for roughly another 30 per cent.
A simple comparison between the 2013 sales volumes of the top eight car brands, whose shares accounted for 88 per cent at that time, and those of 2009, when total light-vehicle sales reached their peak at 144,000, shows that by volume Mazda benefited the most from the market recovery, followed by Suzuki and Kia. The current market momentum suggests that in 2014 Ford is expected to join those brands by riding the recovery wave. Conversely, the expansion has been costly for other players, most notably Toyota. Honda was the only automaker whose sales have remained steady over the period.
In segment terms, the picture also changed significantly. In 2009, compact cars, sub-compact cars, light trucks and SUVs each held more than a 15-per-cent share of the market. Of these, only sub-compact cars and SUVs continued above the 15-per-cent level in 2013, with significant growth of around 3 percentage points in the latter. The share of the other two segments was diluted by growing demand for pickup trucks.
The changes in market structure have benefited some players. It is not surprising that Mazda, with the introduction of the CX-5 SUV and the BT-50 pickup, has gained the most momentum from the market recovery. Similarly, Ford’s Ranger pickup also gained popularity, becoming the best-selling pickup in 2013, and thereby further strengthening Ford’s presence in the country. The Kia Bongo and the Suzuki Carry Series continued to benefit from the strong demand for light trucks.
In terms of local production, Vietnam produced on average 72 per cent of its total light-vehicle sales during the past five years. Undoubtedly, all of the top eight brands have high rates of local production in the country at above average levels. The top two brands in particular, Toyota and Kia, produced more than 90 per cent of their sales in 2013. Essentially, both brands’ key models were produced locally.
In contrast, imports seem to have increased over the years. Comparing 2013 imports with those of 2008, when total sales were at a similar level at 105,000 and 111,000, respectively, imports did increase from around 19 per cent to 25 per cent. In 2009, when sales reached a historic peak, imports also recorded an apex at more than 32 per cent.
At the brand level, it is noteworthy that imports have increased, especially for Mazda, Suzuki and Ford, whose local sales have expanded significantly in recent years. While the CAGR in sales of the three brands had increased by around 8 per cent, and local production grew by almost 5 per cent in the last five years, imports increased at the rate of 18 per cent. This was mainly due to the increase in key imports of highly sought-after pickups and light trucks, as mentioned above.
Given the increasing trend in imports and the impending implementation of tariff reductions under a regional free trade agreement, it is undoubtedly a challenge, not only for the major players in readjusting to Vietnam’s position in the region, but also for the local government when planning the future of its automotive industry.
Kon Thueanmunsaen is a senior analyst at Asean LMC Automotive. He can be contacted via Konjanart@lmc-auto.com