A Latent Rival on the Local Automobile Market

In spite of selling cars at sky-high prices, carmakers in the country have still been dominating the domestic passenger car market for more than 10 years because customers have had no other choice. Anyone can tell that car joint ventures are benefiting from the long protection policy of the Vietnamese Government. However, many are doubtful of the continued domination of foreign-led joint ventures as Vietnam opens its market for all auto firms in the world.

 

The presence of China’s Lifan eye-catching and cheap automobiles at trade fairs in Vietnam has attracted the attention of customers. Mr. Huynh Xuan Phong, Sales Manager of Saigon Ford, said, the highest advantage of Chinese autos is its low price. For example, the Lifan 520 introduced at the Autotech Trade Fair in Hanoi in early June is forecast to be sold at US$16,000 in Vietnam. Lifan and Geely are a few of cheap car manufacturers in China, which make cars priced between US$5,000 and US$10,000 each unit. Phong said, China now has 120 automakers and assemblers, mainly small and medium ones, which only pay attention to low- and medium-income market. Vietnam is one of the first destinations to see the penetration of Chinese cars.

 

In fact, prior to May 1, 2006, when used cars weren’t allowed to enter Vietnam, the public had loudly discussed the presence of Chinese cars here. Only one month later, Lifan made an introduction in Vietnam. Phong said through his experience in witnessing Chinese car sales in Mekong Delta region many current truck shops will easily get licences to sell passenger cars. Once holding such a retail network, Chinese cars will enter Vietnam en masse.

 

Chinese products are usually considered bad quality. However, according to domestic car experts, this remark is one-sided because Chinese cars have been exported to demanding markets and have been accepted there. At present, the price of cars made in Vietnam is very high while imported used cars hardly find a strong position due to high taxes, it is time for cheap car trademarks like Lifan to grasp market shares in Vietnam.

 

Ms Hoang Thi Lien, Deputy Director of the Institute of Industrial Strategy and Policy Research under the Ministry of Industry, said the sales of Chinese four-seat cars in 2005 exceeded 3.1 million units, up 26.9 per cent against 2004 and generated a total revenue of over US$100 billion. Hence, it is unwise to take previous poor quality products to compare with projects of high technology at this moment.

 

Lien said if the Chinese automotive industry has a clear market partition. Lifan and possibly some other cheap car producers will set their feet in Vietnam, Nanjing Auto is outlying plans for building car factories in the United States next year after it acquired the UK-based Rover Co. at US$87 million last year. Obviously, with a price equal to 50-60 per cent of that offered by foreign-led joint ventures, Chinese trucks have deeply penetrated Vietnamese provinces. Once Chinese declared a plan to annex the world auto market by 2010, Nanjing Auto and Shanghai Auto’s products can made presence Vietnam.