THACO Strongly Spurring Auto Parts and Mechanic Production

12:02:43 PM | 6/11/2019

Supporting industry development is seen as an underlying and urgent requirement for developing Vietnam's automobile industry and generating a driving force for other industries. Truong Hai Auto Corporation (THACO) is the pioneering investor and developer of supporting industries on the largest scale in Vietnam. At the same time, THACO has also developed mechanical engineering into a key industry that reciprocally supports automobile and other sectors to create synergized value and enhance competitiveness and sustainable development.

Investing in modern parts factories

Based on the actual demand of the Vietnamese automobile industry and on its business practices, immediately when it invested in the Chu Lai Open Economic Zone in 2003, THACO started building a localization strategy and participating in the global value chain.

Apart from digitally automated automobile assembly and manufacturing factories for customized mass production, THACO invested in Vietnam’s largest auto component manufacturing industrial park in Chu Lai Open Economic Zone, Quang Nam province. Covering nearly 100 ha, the park has 11 parts factories powered by technologies from Japan and Korea, furnished with modern machinery and equipment, and applied with smart management across its value chain, from ordering and manufacturing to distribution. These facilities make interiors and exteriors for buses, trucks and passenger cars; composite components; tweezers; glasses; air-conditioners; ceilings; floorings; bumpers; bodies; seats and seat covers; electric wires; chasses and many other components. These products are not only supplied to THACO’s automobile assembly plants and domestic car makers, but also exported to ASEAN and other markets around the world.

Increasing localization rate, boosting export of cars and parts

Investing in parts factory development, THACO has increased the localization rate of some models to over 40% to meet the regional value content (RVC) to enjoy zero tax when exporting its vehicles to ASEAN markets and exporting its auto parts. The most exported products are bumpers, wire harnesses and seat covers. Its main export markets consist of Korea, Japan, Russia, the Philippines, Kazakhstan, Malaysia, Singapore, Turkey, Bangladesh, Thailand, Indonesia, Australia and Germany. Its parts export value reached more than US$20 million in 2018. In the coming time, the corporation will expand its export markets to Europe and America. Its export value is expected to top US$30 million in 2019.

Currently, THACO is investing in building new automated parts factories, setting up component factories for Mazda vehicles when the output is large enough (50,000 vehicles a year) in the form of joint venture, cooperation and technology transfer from partners who supply Mazda components, joint venture and cooperation with foreign partners seeking to invest in export product manufacturing factories in THACO Chu Lai Industrial Park; cooperation with Kia Motors suppliers to produce parts for Kia passenger cars; and engagement in OEM component supply chain for automobile manufacturers in Vietnam and its partners, Kia and Foton.

Developing mechanics into a key business together with automobile

Endorsing a multi-business development strategy since 2018, THACO has developed mechanics into a key industry together with manufacturing automotive parts. Mr. Pham Van Tai, General Director of THACO, said, using mechanical engineering as a base to develop supporting industries is a strategic approach to improve competitiveness, increase foreign direct investment, speed up technological acquisition and transfer, create a premise for other sectors to develop, thus carrying out the localization strategy and taking part deeply in global value chains.

Investing in mechanical development, THACO has utilized its available technology infrastructure in automotive mechanics to diversify mechanical products. After 16 years of investment in Chu Lai, THACO has formed an auto parts manufacturing and mechanical processing complex and supplied products to big customers such as Doosan Vina, General Electric (GE), Makitech (Japan), Agata, Three Stars and tenants in Chu Lai. Its parts sales to these customers reached VND368 billion in 2018. In the coming time, the mechanical complex will be developed into the Central Mechanical Center, which manufactures and supplies mechanical products for businesses in the region.

Based on its existing technology, equipment, production and management experience, since 2018, THACO has expanded its production from automotive mechanics to other mechanical fields, including agricultural and forestry engineering, construction engineering and industrial equipment mechanics, with a series of new products like agricultural machinery, agricultural equipment, specialized agricultural equipment, agricultural mechanization and transportation service, equipment maintenance and repair service, pre-engineered steel buildings, mechanical structures in construction and transport works, MEP systems, industrial equipment, unpacking and packing service, and scrap recycling.

In addition to existing factories, THACO has also established new companies through joint ventures and cooperation with experienced and capable partners. In March 2019, the corporation kicked off two projects: Agricultural and Forestry Industrial Park and Expanded Mechanical and Automotive Industrial Park. This strategic investment move aims to develop construction mechanics and agricultural mechanics, draw parts suppliers to these places to increase its localization rate and reduce product costs.

Especially in agro-forestry mechanics, THACO has a different approach to create new agricultural values. Currently, the corporation is providing agricultural mechanization solutions for Hoang Anh Gia Lai Group’s farms in Laos and Cambodia. The firm is also expanding cooperation to make and trade agricultural machines and equipment, and research and develop a wide range of machines and equipment for cultivation, tending, harvesting rice, fruit trees, rubber and other motor services.