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Companies

BMW and Bosch support Vietnam's vision for homegrown cars

Vingroup recruits European names to navigate a crowded market

VinFast's luxury sedan at the Paris Motor Show.   © Reuters

HANOI/PARIS -- As Vingroup prepares to become the first Vietnamese automaker next year, the country's biggest private conglomerate has enlisted help from European partners like BMW and Robert Bosch to penetrate a fiercely competitive industry.

VinFast, a Vingroup unit and Vietnam's first auto brand, plans to launch three models in June and an electric vehicle in September. The cars will be made at a sprawling factory in Haiphong, about two hours east of the capital city of Hanoi.

The roughly $3.5 billion facility not only stands out for its size, but also its demographics. About 200 Germans can be seen performing inspections on robots upon entering the factory, with hardly any Vietnamese present.

The plant contains about 1,200 robots, mainly provided by Swiss engineering group ABB. It is slated to go online in February with a production target of 500,000 cars per year in 2025.

"This was just a grass field one year ago," said a German engineer. "Isn't it unbelievable that a factory could be built this quickly?"

Vingroup's new auto plant in Haiphong, Vietnam. (Photo by Tomoya Onishi) Vingroup's new auto plant in Haiphong, Vietnam. (Photo by Tomoya Onishi)

Real estate conglomerate Vingroup announced its entry into the auto market in September 2017. Founder Pham Nhat Vuong has said that VinFast will build a vehicle ideal for expanding the Vietnam brand worldwide.

But Vingroup has done more than just talk. The group has made rapid progress and requested comprehensive partnerships with about 20 mainly European companies, like BMW, Bosch and Siemens. It has even hired an Italian company that has worked with Ferrari to design its vehicles, giving Vietnam's first national cars a heavy European touch.

The Southeast Asian country's new-car sales totaled just 250,000 units last year -- small compared to Japan's 5.23 million. Although Japanese automakers control roughly half the domestic market, Toyota Motor, one of the top sellers, only produces about 50,000 cars there annually.

But a rapidly expanding economy is fueling high growth in the Vietnamese market, which has tripled in five years -- a trend Vingroup seeks to capitalize on.

Car ownership may not be widespread now, but Vietnam's car market has the most potential of any in the world due to soaring economic expansion, said Vingroup Vice Chairman Nguyen Viet Quang.

"We didn't think they would come this far," said a Japanese auto executive surprised by VinFast's massive factory.

VinFast's luxury sports utility vehicle made its debuted at the Paris Motor Show in October with the help of soccer star David Beckham.   © Reuters

Vingroup already pulled off a similar feat in mid-November when it stormed into the electric motorbike market, which had been dominated by names like Honda Motor. After launching sales as planned, anticipation has heightened for Vietnam's first national car.

The European-inspired car lineup will see sedans priced at 800 million dong ($34,300) and sport utility vehicles at 1.14 billion dong -- slightly less than Mercedes Benz or BMW models -- as the rookie automaker mounts a direct challenge to established luxury brands.

A two-day event in Hanoi celebrating the start of reservations for VinFast's new models drew many visitors and 2,000 orders for its motorbikes and cars. A professor who attended said he already owns a Toyota, but has decided his next car will be a VinFast, to support Vietnam's domestic autos.

The company also believes the rise of electric vehicles improves its odds of success. Like Chinese automakers, Vingroup cannot compete against American and European brands when it comes to traditional cars, but it could possibly turn the tables with electric vehicles, which are easier to produce.

Vingroup has already built up a vast sales network in the blink of an eye, using its own portfolio of commercial facilities like Ho Chi Minh City's Vincom Center mall to open about 200 dealerships.

The group has also launched an aggressive marketing campaign. VinFast recruited soccer star David Beckham to unveil its new models at the Paris Motor Show in October and will serve as a sponsor for the country's first Formula One grand prix, which will be raced on the streets of Hanoi in 2020.

But the difficulty of auto manufacturing is not to be underestimated. Even electric vehicles require several tens of thousands of parts, and it is unlikely that Vietnam will foster local auto parts makers. This leaves significant concern about the stable procurement of components, given a lack of major foreign suppliers in the country -- a situation that could diminish quality.

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