A growing country in the automotive industry supply chain, Vietnam has observed various trends as it expands domestic automobile production. Primarily, Vietnam welcomed its first domestic automobile production factoryin 2019 with the company Vingroup.
The demand for auto parts and products will only continue to increase in Vietnam, despite the coronavirus pandemic, as companies have begun to shift automobile production domestically. Moreover, several countries are currently pursuing diversification of the supply chain away from China.
While Vietnam currently features a low automobile ownership rate, Vietnam's growing middle class is expected to increase demand. COVID-19 may have stunted growth of the market in the short term; however, the continued development of the country's middle class is expected to override the economic detriment caused by the pandemic. Additionally, the automotive industry trend has suggested continued growth as Vietnam's automotive production has grown 10% per year from 2015 to 2018. Major automotive players such as Kia, Toyota, and Honda have already established themselves in the Vietnamese market, and addition to these market players should continue.
Supply Chain Operational Shifts
In the midst of the pandemic, the main shift in Vietnam has involved moving production of automobiles in country and encouraging larger companies to enter as well. Vietnam is a desirable location along the supply chain due to low barriers for trade and accessibility to ASEAN markets. Large manufacturers such as Honda, Toyota, Nissan, and Ford have all moved into Vietnam for the first time; however, COVID-19 halted production temporarily. Another change in the Vietnamese supply chain is higher levels of global integration. While most markets and industries suffered as a result of COVID-19, Vietnam displayed its emergence in the global market as exports expanded by 8% in the first two months of 2020.
More recently, Vingroup announced a push into the U.S. automotive market, indicating their plans to acquire a share of the luxury car segment, including electric cars, and possibly investing in a manufacturing plant.
The information provided in this article is based on research and report provided by George Washington University – CIBER Bootcamp and commissioned by IBDGi on behalf of AMT for the publication of the white paper Views on the Manufacturing Technology Supply Chain and International Trade: Changes in the Global Supply Chain, the International Manufacturing Industry, and the Demand of MT Equipment. To access the full white paper, click here.