Vietnam is getting into the car business with its own brand.
Real-estate conglomerate Vingroup JSC’s auto unit VinFast yesterday marked the rollout of its first vehicles from its assembly line, embodying the aspirations of the fast-developing country’s government to build a modern manufacturing sector.
“This makes a great contribution to the national economy,” Vietnamese Prime Minister Nguyen Xuan Phuc said in a speech during a ceremony at VinFast’s complex of six automated factories constructed in 21 months in the northern port city of Haiphong. “It affirms the [Vietnamese] Communist Party’s policy that the private sector is a very important driver of the economy. I want VinFast to go to the regional and global markets.”
VinFast, which is to start delivering cars to customers on Monday, wants to be the first Vietnamese company to succeed at challenging foreign competitors such as Toyota Motor Corp, Ford Motor Co and Honda Motor Co in one of the world’s fastest-growing economies.
Xuan Kien Automobile, known as Vinaxuki, failed to win over brand-conscious Vietnamese with its local car models before folding in 2015.
The first VinFast rollout, a hatchback named Fadil, is initially priced at 394.5 million dong (US$16,900).
Vingroup said in 2017 that it planned to invest up to US$3.5 billion in its auto business.
The company is also producing sedans, sport utility vehicles and electric motorbikes.
However, the company faces challenges in Vietnam’s aspirational culture.
“Product quality is a concern” among consumers, said Truc Pham, a senior analyst at ACB Securities JSC in Ho Chi Minh City. “Vietnamese people favor foreign brands for high-value products. It will take years for customers to accept a new local brand.”
VinFast plans to make 250,000 vehicles during a first stage of operations, with projected production increasing to 500,000 vehicles a year by 2025.
The company said last year that it expects to begin exports in the middle of next year.
VinFast said it received 10,000 vehicle pre-orders a year ago.
Vietnamese purchased 119,497 new vehicles in the first five months of the year, an 18 percent jump from the year-earlier period, according to the Vietnam Automobile Manufacturers’ Association.
The vehicles are not completely made in Vietnam. The Fadil uses the chassis of the Karl Rocks model by PSA Group’s Opel. The sedan and SUV are built on frames from BMW AG, designed by Italian design house Pininfarina and have components engineered by Magna Steyr.
Jim Deluca, the former vice president of global manufacturing for General Motors Co, was hired as VinFast’s chief executive officer.
Vingroup embraced the government’s aspirations to see domestic manufacturers make high-value products for the nation’s growing middle class in an economy that has expanded at an average rate of 6.6 percent since 2000 — boosting annual incomes to almost US$2,600 from about US$400.