[Vnbiz] Vietnam is getting richer

[Tran Dinh Hoanh]

Dear CACC,

This is great.  I would love to see all our Vietnamese brothers/sisters in
cars.

HOWEVER, there is something critical that we need to do FAST.

We need to build very good public transportation systems in major cities,
RIGHT NOW, Hanoi and Saigon first.  There are buses already.  But the bus
systems must increase in quantity and improve in service quality
tremendously to attract major part of the population.  And we need to build
train/subway systems.  NOW!

It is extremely difficult for a major city to grow properly without a very
good public transportation system.  And Vietnam is very far behind on this.

Have a great day!

Hoanh



On 12/6/06, Phan, Tai <Tai.Phan at ed.gov> wrote:
>
> [ Vietnam Business Forum ]
>
> Vietnam is getting richer
> HANOI (Reuters)
> Demand for motorcycles dips as locals switch to cars expected to rise
>
> Lai Yonghua pops the hood of a small, white sedan parked on the side of
> the road as a steady stream of scooters buzzes by.
> "Made by BMW in Brazil," he beams, holding his hand above the hot
> 1.6-litre engine of the Chinese-made Lifan 520.
> "Whaddaya think? Not bad for just over $10,000, right?"
> Vietnam is a country of motorcycles, and its streets pulsate with the flow
> of two-wheelers, from ageing workhorses such as the Honda Super Cub to sleek
> new Italian Piaggios.
> The scooter has become to urban Vietnamese what the car is to American
> suburbanites - a must for every adult.
> But that is changing as motorcycle sales start to dip, while industry
> analysts say demand is expected to rise for cars such as Lai's sedan, made
> by Chongqing-based automaker Lifan, the company he represents in Vietnam.
> "Sedans are definitely the future in Vietnam," said Lai, clad in blue jeans,
> a red polo shirt and sneakers.
> In the late 1990s, Lifan Group, one of the biggest motorcycle makers in
> the world, led a stampede of Chinese bike makers into Vietnam that helped
> turn a luxury item, whose value was at one time measured in gold, into a
> virtual commodity that can be had for less than $300.
> There's about one motorcycle for every four people in Vietnam, with a
> population of 84 million, and annual sales of motorcycles and scooters are
> around 2 million.
> But the brakes are already on.
> The Vietnam Bicycle and Motorbike Association said in October that
> motorcycle sales have been dropping by about 30 per cent a year for the past
> couple of years.
> Lifan can make up to 50,000 motorcycles a year at its Vietnam plant, but
> Lai said production had dropped to about 30,000 due to the fall in demand.
> There are more than 50 motorcycle makers in Vietnam. Lai predicts that
> number will drop to 10 - at the most - in the next few years. The market, he
> says, is saturated.
> Vietnam's motorbike industry may be drifting out of the fast lane, but the
> country's car market still has some way to go before the future that Lai
> envisions becomes a reality.
> Vietnam's annual per capita income is one of the world's lowest at around
> $700, although that can rise to an average $2,400 in major cities.
> Car prices in the communist state are steep due to import tariffs of up to
> 90 percent and a consumption tax of 50 per cent.
> The taxes, including a January 2005 hike in a consumer tax on locally
> assembled vehicles, have caused auto sales in Vietnam to fall 14.5 per
> cent in January-October of 2006 after a 12 percent drop in 2005.
> Vietnam's poor transport infrastructure, narrow roads and few highways are
> not exactly conducive to car ownership, Lai says.
> But the equation might change when Vietnam joins the World Trade
> Organisation, probably by the year-end, and slashes high auto tariffs that
> industry experts say has kept demand down.
>    "With the WTO membership already approved and Vietnam's commitments to
> reduce import taxes and tariffs, it will be an exciting market for foreign
> car makers," said a marketing executive for Toyota in Hanoi.
> At present, there are only 220,000 cars in the world's 13th most populous
> country, and another 400,000 or so trucks and vans  - that's about one for
> every 135 people.
> In Thailand, by contrast, with a population of 64 million, there is almost
> one vehicle for every three people. In the Philippines, with a population of
> 85 million, it's about one car for every 20 people.
> "In terms of car consumption, Vietnam starts from a very low base but it
> has a very fast-expanding economy, with GDP forecast to grow over 8 per cent
> in [each of] the next five years," said the Toyota executive, who asked not
> to be named.
> "Therefore, demand for cars is expected to soar at least 15 per cent a
> year."
> Toyota's Vietnam sales rose 17 per cent in the first 10 months of 2006, to
> 10,963 units, Vietnamese media said, giving the Japanese firm around 45
> percent of the market.
> Honda, Ford, Mercedes, BMW and a handful of other car makers are also
> assembling and selling vehicles in Vietnam, though their sales lag far
> behind those of Toyota.
> Auto companies claim to have invested more than $700 million in production
> lines in Vietnam for domestic sales and export. Earlier this year, Lifan
> said it would establish a $30 million joint venture with Vietnamese
> companies to produce sedans.
> Lifan plans to make Vietnam a beachhead for its Southeast Asian sales as
> trade barriers in the region fall.
> Lai said the cost of the Lifan 520, which was unveiled last year and bears
> a resemblance to smaller Hondas or Toyotas, would drop to less than $10,000
> once they are made in Vietnam.
> Keeping prices down, says Lai, is the key.
> Toyota's most popular vehicle in Vietnam is the 7-seat Innova, which
> retails at $29,900. And it is launching the 2007 Camry this week with prices
> starting at over $50,000. The vehicles are being targeted at companies and
> Vietnam's wealthy.
> At the moment, only the rich buy cars in Vietnam due to the high prices,
> low wages of the masses and lack of feasibility of auto loans, which can
> cost as much as 15 per cent interest per year and usually have to be paid
> back within five years.
> With GDP growth predictions pointing to a big jump in per capita income in
> the next few years, Lai is banking on a broader market in the future.
> He hopes Vietnam's economy follows the model of China, where more than a
> decade of booming economic growth has driven car sales up by making them
> more affordable to many Chinese.
> In October, car sales in China, now the world's second largest market,
> rose more than 28 percent to 410,000 units.
> Last update on: 5-12-2006
> --
> Tran Dinh Hoanh, LLB, JD
> Attorney of Law
> Washington DC
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