For its 90 million motorbike and scooter riders, Vietnam wants to design and make cars.
aiming to roll out the first car in 24 months, plans to invest up to $3.5 billion to set up a manufacturing and research and development complex, were announced by the country’s largest real-estate company Vingroup JSC.
Vingroup Vice Chairwoman Le Thi Thu Thuy said that with a plan to make sedans, sport utility vehicles and electric cars in the future, the eHanoi-based developer will break ground on the $1 billion to $1.5 billion first phase of the plant soon.
“We want to create an affordable and high-quality car for Vietnamese,” Thuy said during an interview at the company’s Hanoi headquarters.
She said that though it plans to fund most of the project itself, regarding a potential loan for as much as $800 million, Vingroup has signed a memorandum of understanding with a major investment bank.
In a region where foreign brands including Toyota Motor Corp. and Volkswagen AG have had years of dominance, China and Malaysia have also tried to create cheaper, local brands to woo consumers and Vietnam’s ambitions are similar to efforts by such companies in those two countries.
Steve Man, a Hong Kong-based automobile industry analyst for Bloomberg Intelligence, said that challenges face by Chinese automakers struggling to win over buyers in the world’s biggest vehicle market will also be faced by Vingroup.
Thuy said that the focus on self-financing for the new company called VINFAST, ware being made by Vingroup. To be the car company’s chief executive officer, the company will appoint an executive from a global automaker. She said that to help produce main components such as engines, the company will rely on U.S. and European companies and wants to use Italian design houses.
Including the new automobile business. Vincom Retail, a Vingroup subsidiary backed by Warburg Pincus, Vingroup, which began as a real estate company, is now a conglomerate with seven core units. With the potential to becoming the country’s biggest-ever share sale from the private sector, the group is planning a domestic initial public offering. As economic growth in Vietnam raises living standards and increases shoppers’ disposable incomes, the mall operator is preparing to raise funds this way.
Michel Tosto, head of institutional sales and brokerage at Viet Capital Securities JSC said that the car project is going to be a “very difficult” challenge. He said that a venture with a foreign automaker, should rather be sought by the company.
“It doesn’t have the expertise nor the capital for that,” Tosto said. “It’s a highly competitive space dominated by foreign brands.”
Trying for years to create a domestic car brand are Chinese companies such as Geely, BYD, Beijing Auto and Chery. According to the China Association of Automobile Manufacturers, sales of cars bearing Chinese nameplates accounted for 43.5 percent of the total sales during January to July.
According to the Vietnam Automobile Manufacturers’ Association, Toyota is Vietnam’s biggest car seller with a 23 percent market share in July. Ford Motor Co. had 12 percent.
(Adapted from Bloomberg)