New opportunities for local auto-suppliers to take off
New opportunities for local auto-suppliers to take off
Foreign automobile manufacturers are expanding their operations in Vietnam, opening opportunities for domestic suppliers to take off.
In the last days of 2022, Toyota launched Vietnamese-made units of its Veloz Cross and Avanza Premio car models in the northern province of Vinh Phuc. The move will help to replace the import of these models from Indonesia, which began in March 2022.
Between their debut in the country and last December, over 16,000 units were sold. The Veloz Cross has continually been among one of the best-selling cars and topped the 7-seater range with a market share of 40 per cent, according to information published by Toyota at the launching ceremony. In 2022, Toyota ranked first in car sales with 92,625 units, up 34 per cent on-year. The company earned $68.6 million from exporting spare parts and accessories, while contributing $1.25 billion to the state budget.
Meanwhile, in mid-November automaker Thanh Cong Group and Hyundai held an inauguration ceremony for their second Hyundai Thanh Cong Vietnam factory in Gian Khau Industrial Zone (IZ), based in the northern province of Ninh Binh. The factory covers 50 hectares with a total designed capacity of 100,000 units per year, raising the total capacity of both complexes in Vietnam to 180,000 units by 2025, to meet demand both at home and abroad.
The following month, BMW Group decided to partner with Truong Hai Auto Corporation (THACO) to locally produce BMW vehicles in Vietnam. The cooperation will extend the BMW Group’s production network for vehicles in Asia, which now includes BMW plants in India and Thailand, joint venture plants in China, and partner plants in Malaysia, Indonesia, and now Vietnam.
“This is a major milestone for the BMW Group in Asia-Pacific as we look to strengthen our geographic footprint in the region. There is long-term growth potential in Vietnam’s, and we are excited to take this next step with THACO to produce some of our most popular models,” said Michael Nikolaides, senior vice pesident of BMW’s production network.
These expansions will create opportunities for local vendors. Notably, over 230 parts and components for Toyota’s Veloz and Avanza models are supplied by local vendors. At present, Toyota has a portfolio of 58 suppliers, 12 of which are local vendors with a total localisation ratio of 1,000 units.
Hiroyuki Ueda, director general of Toyota Vietnam, described the move as an important milestone for the carmaker in the country and affirmation of its commitment to promoting local automobile manufacturing.
Ngo Huu Hoang, general director of Giza E&C, told VIR, “In the context that foreign manufacturers are increasing localisation ratios, domestic suppliers need to improve capacity to hold these opportunities. Moreover, they should link with each other to form a solid ecosystem, which will create competitive advantages compared to imported products.”
Giza E&C is the parent company of mechanical supplier Haast Industry Vietnam – the first-tier vendor for VinFast and Panasonic, is looking to become a first-tier vendor of Samsung. Investing in supporting industries, especially in precious mechanics, requires determination, according to Hoang. “Thus, from the beginning, local vendors should not simply become outsourcing firms to take care of standard works – they should set the target to be a key link in the supply chain,” he said.
However, to make local supporting industries take off, along with the enterprises’ determination and effort, the government should have more support policies. “We especially need incentives relating to capital for businesses that have aspirations. There should be a special mechanism to support vendors that have capacity, desire, and boldness,” said Hoang.
Vietnam currently has over 7,000 machinery companies and 5,000 businesses operating in supporting industries.
THACO Industries has initiated a strategy combining large-scale mechanics production and supporting industry development through seamless investment as well as product and services diversification. The company will use $550 million to produce machinery and supporting industrial products for export and domestic sale.
In December, it inaugurated the largest mechanical centre in Vietnam at THACO Chu Lai IZ in the south-central province of Quang Nam. The facility will provide mechanical processing and surface treatment services on large-scale, manufacturing products such as semi-trailers and heavy steel structures. The corporation has also begun construction of a major research and development centre in the same province.
