Vietnam is a key automobile market in Southeast Asia with good growth prospects, and that has driven Hyundai Motor's expansion in the country, says Youngtack Lee, President of Hyundai Motor Asia Pacific.
Hyundai Motor and Vietnam’s Thanh Cong Group have partnered with each other, first in distribution and later on in assembling and manufacturing passenger cars and commercial vehicles. The venture has become one of Vietnam’s leading automakers. At this juncture, what is your assessment of the country’s automobile market and industry prospects?
In 2017, Hyundai Motor Company and Thanh Cong Group established a joint venture (JV) that enabled a manufacturing system for products that reflect and fulfill the needs of Vietnamese customers. The Hyundai Thanh Cong JV has been striving to manage good quality and parts localization with the support and collaboration of experts. We also established a sales JV in April 2021 to strengthen the dealer network, provide new customer experiences, carry out continuous CSR activities.
In the future, we will continue to communicate closely with Vietnamese customers through innovative technologies and products. Through this, we would like to make ‘Hyundai’ the most innovative and beloved auto brand in Vietnam. In Vietnam, we expect to see strong economic growth in the future, based on its youthful population, high participation in tertiary education, robust employment rate and rising incomes.
The local automobile industry is expected to grow by an annual average of 7% until 2025. The average national income is also expected to increase as the economy continues to develop. Also, Vietnamese customers are valuing safety more highly when making a vehicle purchase decision. Considering these factors, we expect Vietnam’s automobile market to continue growing.
Even as the competition in Vietnam’s automobile industry gets tougher, the joint venture has embarked on the Hyundai Thanh Cong 2 project (HTMV 2) in Ninh Binh Province, raising the annual capacity to 150,000 vehicles.
What are the key elements that led to this investment decision?
Upon considering the future potential growth of Vietnam’s automobile market, we decided it would be essential to expand local production in order to provide various products that customers want at affordable prices. This led to our decision to invest in Hyundai Thanh Cong Manufacturing Vietnam (HTMV) 2.
Hyundai Motor Company is keen to expand its investments in Southeast Asia markets. Vietnam is one of the key Southeast Asian markets. We are designing HTMV 2 to be expandable. In the future, production can be increased gradually to flexibly respond to market demands.
Developing the supporting industry and raising the localization rate is a strategic aim of the government. Given your current projects, what plans do you have to develop the supporting industry?
We aim to create many jobs through establishment of HTMV 2, enabling us to contribute to the local economy. From a global sourcing perspective, we are leveraging HTMV 2 to encourage more global auto parts suppliers to establish operations in Vietnam.
In addition, we are continuing to cooperate with parts makers in Vietnam to expand localization. If necessary, we will contribute to the development of the Vietnamese parts industry through technological alliances with Hyundai Motor Company’s partners or close collaboration with Hyundai’s global R&D network, including technology research centers in India and Europe, as well as Nam Yang R&D Center in Korea.
What policy recommendations would Hyundai Motor Company make for developing the country's automobile industry?
The automotive industry requires large-scale investment and economies of scale. Unlike many countries where certain vehicle segments predominate, vehicle demand in Vietnam is evenly distributed across various segments. It creates a challenge for auto parts makers to make an investment and produce parts in small volumes for each vehicle segment.
If more consumers can purchase vehicles more easily through the variety of policies providing tax incentives, and if the market grows, the investment of auto parts makers is also expected to increase.
Industrial demand will grow rapidly, which is expected to accelerate investment by parts makers. Parts makers’ investment in Vietnam will lead to cost efficiency in vehicle manufacturing, which will help establish a virtuous cycle of industrial demand, growth and development.
To accelerate the investment, we expect that the Vietnamese government will allow more incentives for local automakers and locally-produced models based on their economic contribution, thus allowing a shared economy collaboration. In addition, as we are witnessing a global transition to eco-friendly cars such as hybrid and electric vehicles, it would be appreciated if the authority announces a roadmap for fostering the ecosystem toward ecofriendly vehicles in Vietnam.