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Local auto market offers hopes of growth

Update: March, 03/2015 - 09:21

US automaker Ford reported record sales in Viet Nam every month in the latter part of 2014 as its market share rose to nearly 9 per cent. Viet Nam News speaks with Jesus Metelo Arias, managing director of Ford Viet Nam, to hear the full story and where he sees the Vietnamese auto industry in 2015.

Ford Viet Nam's sales growth in three current years.

Last year was a successful year for Ford Viet Nam with sales growth of 71 per cent. Your company now has an unprecedented 8.9 per cent market share. What do you attribute this success to?
Jesus Metelo Arias

We were truly buoyed by our success in 2014, in which we sold a record-breaking number of cars in this market. I would also like to highlight that our year-on-year sales growth of 71 per cent for the year was significantly larger than the Vietnamese auto industry's growth of 43 per cent.

Taking a broad perspective, there is no doubt that growing household incomes have helped to drive new car purchases in 2014, as they have in years prior. We expect this will continue to be a major driver of sales moving forward into 2015.

In terms of activities undertaken by Ford to grow our business, the most significant move last year was the launch of the new Ford EcoSport urban SUV—the first car in this category in Viet Nam. Despite only being introduced halfway through the year, the EcoSport sold in excess of 1,600 units, and we're continuing to see very strong interest in the vehicle. Ford Ranger was the most favourite pick-up of Viet Nam, accounting for one out of every two pick-ups sold.

The year also saw us open new dealerships in Can Tho and Pleiku, allowing us to reach even more customers in the northern and central regions of the country, and helping us to further expand our sales across the country. In January 2015 we continued to expand our network to 27 outlets with the opening of new dealer Binh Duong Ford and the Sai Gon Ford Pho Quang outlet in the south.

A famous auto column has named Ford as one of the four new pillars of the Vietnamese auto market. It attributed your company's current successes to a strategy called "One Ford". What do you think about this assessment?

And can you tell more about this strategy?

One Ford is primarily about ensuring that our customers around the world have access to the same innovative features and designs, regardless of what market they are in. With greater global connectedness and awareness, consumers around the world expect to be able to enjoy the latest technologies regardless of where they are - and the strategy helps us to meet this need. We consider this to be an important strategy in Viet Nam, where consumers are particularly conscious of the products they invest in. The strategy helps us utilise our global resources and provide customers products with the highest quality and green, safe and smart features.

Do you have any plans to expand production in Viet Nam? Will your company's Smart Mobility Plan, which seems to involve a slew of new technologies, be introduced in Viet Nam?

As some readers may be aware, we announced the Smart Mobility Plan at the International Consumer Electronics Show on January 6. In a nutshell, the Smart Mobility Plan is the strategy to evolve our vehicles to meet growing global transportation challenges. In order to meet these challenges, we are conducting experiments around the world that seek to meet these challenges through connectivity, mobility, autonomous vehicles, the customer experience and big data.

Currently, these activities are in the experimental phase. However, in line with the One Ford programme, consumers in Viet Nam can expect to be receiving the benefits of new technologies resulting from these trials at a similar time to other consumers around the world. We believe this is particularly important in this market, where population growth and traffic congestion are both issues that have to be contended with.

Vietnamese consumers still prefer Japanese cars. How do you hope to change this perception?

The perception was a legacy of history and nowadays all brands are competing against the Green value!

Ford, for instance, has put vast resources globally into researching fuel efficiency and green technologies to be applied across all of our vehicles—not just our small and medium-sized cars. Our multiple-award-winning EcoBoost technology is a great example of an engine with significant power and performance that at the same time provides superior fuel efficiency and low emissions levels. We are the pioneer in bringing such advanced technologies to popular car segments all over the world at affordable prices.

We even go further with green technologies blended in our One Ford products like six-speed transmission, advanced four cylinders, direct injection and Ti-VCT engine. We also build the EcoMode system to encourage drivers to drive their car properly with best fuel efficiency.

From January 2015 cars in Viet Nam should have energy labels that show the fuel consumption level of that car to customers. Thus the information now is clearer and customers could decide which car best suits their needs of efficiency, safety and comfort without making decisions based on word of mouth only.

Many people are postponing their car purchase since they expect tariffs, and thus car prices, to reduce this year thanks to the ASEAN Trade in Goods Agreement (ATIGA). What do you think about this?

It is clear that the Government had approved the road map of reducing duty under ATIGA to 50 per cent in 2015, 40 per cent in 2016, 30 per cent in 2017 and 0 per cent in 2018. Thus, there will be an unchanged rate until the end of 2015.

Secondly, with respect to the special consumption tax (SCT) on automobiles in 2015, the current Law on SCT remains effective. The National Assembly has already passed a new Law on SCT at its 8th session. In the new Law on SCT, the SCT on automobiles remains unchanged and the law will take effect in January 2016. From the information we have gathered, the proposal on reducing SCT has not been agreed upon by other related ministries at this point.

From our point of view, there is little likelihood there will be an impact on automobile prices by early 2015.

Sales of imported cars rose by more than 80 per cent in 2014, accounting for 50 per cent of total sales. What was the reason for it and will it continue in 2015?

Total 2014 sales results show that the auto industry grew at 32 per cent in comparison with 2013 and CBU (complete built unit) sales rose 83 per cent. However, the proportion of CBU sales to overall sales did not increase all that much – just to 26 per cent from 20 per cent and still lower than the mix in 2009 when imports made up 28 per cent of sales. It came from increases in some truck and pick-up truck segments. We could expect the growth of the industry in 2015 but at a slower pace compared to 2014.

Local manufacturers could be hit hard when tariffs on cars imported from ASEAN member countries are abolished in 2018. What should they do to cope, and as a manufacturer what support do you expect from the Government? Will Ford Viet Nam begin to export to other ASEAN countries to take advantage?

Viet Nam is going to fully integrate into ASEAN by 2018 and whether the Vietnamese automobile industry survives and continues to develop or not largely depends on closing the cost gaps and strengthening the cost competitiveness of local CKD (complete knocked down) operations. Due to the small production and economic scale, automotive production costs in Viet Nam will be 20 per cent higher than for automobiles imported from ASEAN in 2018. These disadvantages come from several factors: The fundamentals for SCT calculation for [imported] automobiles are not common; import duties on auto parts and components for CKD operations are still high; and automobile production costs in Viet Nam are very high due to too small output.

We need the Government to support enterprises to close the cost gaps and strengthen the cost competitiveness of local CKD operations, maintain consistency and transparency in policies, reduce the high taxes/special consumption tax, and expand market size to utilise economy of scale. — VNS

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