Introduction
Motorcycle industry background Up to 1999, FDI motorcycle assemblers invested in Vietnam and began production, at first using imported parts but gradually increasing the localization of components. Being one of the first foreign-owned companies, Vietnam Manufacturing and Export Processing Co., Ltd.(VMEP) began to manufacture motorcycles in Vietnam from 1993. Originally Ching Feng Group invested 100% while Sanyang Motor Taiwan (SYM) provided management and technical support. VMEP's operational rights were transferred from the Ching Feng Group to Sanyang in 2000. Suzuki arrived in 1996, Honda in 1997 and Yamaha in 1998. Many local vehicle assemblers emerged supported by Chinese suppliers.
 During 2000-2005,
local China supplied motorcycle assemblers dramatically increased
in number. The price positioning was low and they rapidly dominated the market,
garnering between 60-70% market share between 2000-2003. Japanese makers recognized
that a significant increase in volume was possible with a price adjustment and as
a consequence targeted cost efficiency. By the end of 2005, over-capacity and severe
competition exerted significant downward pressure on the prices of “Chinese” motorcycles
produced by Vietnamese assemblers. Furthermore, customers lost faith in the quality
and customer support and with a reduction in price gap to competing Japanese product,
they switched to Japanese products. Direct parts imported from China fell significantly and domestic production of “Chinese”
parts increased. As a consequence however, and with less Japanese supplier involvement
compared to Thailand and Indonesia, parts production gradually increased providing 70-80% localization by 2005.
Severe competition has exerted significant downward trend in the prices of local
motorcycle producers and assemblers. VMEP plans to integrate with resources from
mainland China for technical support on motorcycles and engines in preparation for setting
up plants Indonesia, with the rather ominous slogan of "Cultivating Vietnam, Partnering with China and Marching into ASEAN".
Transition from CKD assembly to local supplier fed production took approximately a quarter of the time employed in Thailand and Indonesia. Part of the reason for rapid development of Vietnam’s motorcycle industry has been impending free trade agreements that would provide little protection from other countries specializing in low end products, such as Thailand, Indonesia or China. The role of VMEP and the development of the supplier base means Japanese makers do not dominate the Vietnamese market as they do Indonesia and Thailand. Market characteristics The motorcycle market in Vietnam is unique compared with other developing countries in the region. 1. Motorcycle use is very high compared to cars. 2. Geographical distribution of motorcycle use is not uniform within Vietnam, especially between urban and rural areas. Hanoi and HCM city are saturated with 2 people per vehicle, but rural areas are likely to catch-up quickly 3. The Vietnamese motorcycle market is very dynamic and consumer tastes and trends also change quickly.
Motorcycles seem well suited to Vietnam’s warm climate. With a low purchase price and low running costs, bikes are a compact and flexible form of personal transport through narrow streets especially when public transport is lacking. They can also carry commercial goods. Between 60-80% of city dwellers use a motorcycle for personal transportation for short trips less than 10km. The surge in motorcycle usage has brought complications and put a strain on the infrastructure. Many riders have poor discipline and lack proper training. Despite the rather slow speeds compared to other motorcycle markets, motorcycles provide little protection in accidents, especially with cars and trucks. The huge numbers of motorcycles create large traffic jams and increased pollution. Although much can be learnt from Taiwan’s approach to controlling traffic and gas emissions, the sheer number of vehicles involved in Vietnam make the same gas emissions checking implausible. Increasing segmentation sees the role of motorcycles vary between commercial transport to fashion statement. Following years of importing CBU vehicles, Piaggio started production in 2009. Although sales were modest, they demonstrate the existence of a “high-end” in the market. Conclusion Sales are expected to continue rising on the back of continued urbanization and when measures are taken to reduce urban congestion, rural sales are expected to offset losses. However, concrete measures to manage congestion, pollution and safety are urgently required. Important historic events in the motorcycle industry.
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