HO CHI MINH CITY -- Vietnam's Dry Cell & Storage Battery, better known as Pinaco, and Japan's Furukawa Battery plan to become strategic partners, and will sign an agreement by the end of the year, according to a letter sent to Pinaco shareholders this week.
The five-year agreement covers Furukawa Battery's technical input, its rights to assign representatives to Pinaco's board, and its rights to buy shares that become available. The Japanese company already owns 10.54% of Pinaco, and is its second largest shareholder after Vietnam National Chemical Group with 51.43%.
Pinaco is looking for "advanced technologies" from its Japanese partner. The arrangement should enable it to overcome production challenges and weak management, as well as to improve marketing. In 2010, Furukawa Battery helped Pinaco produce a more advanced valve-regulated lead-acid battery for motorbikes.
Pinaco currently produces standard storage batteries and dry cell products. These are distributed domestically through 200 agents, and exported to Cambodia, China, Myanmar, Sri Lanka, and the UAE.
Pinaco has benefited from high growth in domestic sales of automobiles and motorbikes. There were a total of 45 million motorcycles in the country last year, when the number increased by 2.8 million. Over 304,000 automobiles were sold in 2016 compared to 133,000 in 2014. The company is targeting 2.7 trillion dong ($118 million) in revenue this year, an 8% year-on-year increase.
Furukawa Battery has already had success penetrating Indonesia and Thailand. Observers said the new partnership will focus on the automotive segment, following recent regulatory changes that will see Vietnam give priority to promoting the industry over the coming decade.
With plans to build a national car, Vingroup, a powerful state enterprise, recently broke ground on an automotive plant with a production capacity of 500,000 units. The main products will be electric cars and scooters incorporating up to 60% local components from suppliers such as Pinaco.
Tariffs on car imports from members of the Association of Southeast Asian Nations will be lifted entirely in 2018, and Vietnam's car market is expected to grow at 20% annually in the following years.