VinFast sales thriving in the first 9 months of 2020
During the first 9 months of 2020, Vietnamese car brand VinFast has made impressive strides in the domestic automobile market. In 2019, VinFast inaugurated an exclusive automobile manufacturer, which claimed to be the first auto manufacturer in Vietnam with a closed, synchronous, and complete production cycle.
At the same time, the domestic automobile market grew significantly; national car sales in 2019 reached a record of 401,890 vehicles, up 12% compared to the same period last year. However, due to Covid – 19 epidemic outbreaks, the total sales dropped sharply in early 2020. According to the Vietnam Automobile Manufacturers’ Association (VAMA), only 179,000 vehicles were consumed in the first nine months of 2020, down 22% compared to the same period last year.
Source: VIRAC, VinFast
VinFast’s car sales grew steadily despite the market downward trend. Between three months from May to July, VinFast Fadil had a superior sales volume, exceeded Hyundai i10 and Kia Morning sales numbers. In July, the Vietnamese hatchback line was one of the market’s best-selling cars for 1,577 vehicles sold; competitors such as Kia Morning and Toyota Wigo sold 580 and 267 vehicles, respectively. Overall, the VinFast consumption rate remained stable, in which the Fadil series accounted for nearly 70% of VinFast total sales.
(VinFast publics sales from May 2020)
Source: VIRAC, VAMA, VinFast
When the Covid -19 second wave emerged, in August VinFast’s sales plummeted to 1,494 units, of which the Fadil line sold 849 units, 700 units less than the previous month. This low-cost model also lost the best-selling slot to the Hyundai Grand i10 and dropped to 9th place for the top ten best-selling cars in the market.
However, in September, VinFast made a striking comeback with record sales of 3,626 cars, including 1,515 Fadils, 804 Lux A2.0s, and 1,307 Lux SA2.0s. VinFast Fadil has successfully climbed back to the top of the class A car segment; thus, the series was ranked 4th in the top ten best-selling cars in September, solely after Hyundai and Toyota.
In September, Lux A2.0 and SA2.0 once again triumphed in their segment sales rankings. VinFast Lux A2.0 led the high-end sedan sales ranking, especially in September, with an impressive growth of more than 500 vehicles compared to the previous month. VinFast Lux SA2.0 also came first in the race with Toyota Fortuner, Hyundai Santa Fe, and Ford Everest, with 1,037 units sold for the billion-dollar SUV sectioned. Undoubtedly, Lux SA2.0 is the most popular luxury SUV in Vietnam and one of the best-selling mid-size SUVs in the market.
Shortage of imported supply helps VinFast surpass competitors
Unlike other auto manufacturing competitors depending mostly on imported supply, VinFast can produce essential auto components such as engines, chassis systems, and casings. VinFast automobile factory controls the completed stages to create a car, from welding the hull to producing engines. The automaker has spent 30% of its factory’s section to produce supporting components and will continue to invest in the components and spare parts production industrial complex, serving the company’s automobile assembly and export projects in the future.
On the contrary, most Vietnamese automobile manufacturers are only assembling vehicles based on the available values, resulting in more than 80% of automotive components and parts to be imported. Most of Vietnam’s supplements industry is subject to global automotive corporations. Only a few domestic enterprises participate in the supply chain, producing materials with low technology content such as seats and wiring.
In early 2020, Covid -19 outbreaks throughout the world have severely affected the foreign components suppliers. While being the two main markets that Vietnam consumes components, Korea and China are also two countries severely affected by the pandemic. In the first 6 months of 2020, total import turnover decreased by 17.3% compared to the same period of 2019. Korea remains the main market with import value reaching 421.04 million USD, accounting for 26.1% of the total import turnover, down 24.1% over the same period in 2019. Besides, China accounted for 17.5%, total turnover in the first 6 months reached 282.44 million USD, down 18.5% compared to the same period last year.
As car businesses only stock needed auto parts, disrupted supply flow limited factories’ manufacturing capacity. Since foreign suppliers retained their production due to pandemic outspread, most domestic auto productions are in shortage of supplies. Additionally, the country’s assembly and production activities are inevitably delayed when the inspection and transportation components are tightened. Lack of raw materials and assembly components leading many automakers to suspend their activities and development plans.
VinFast automobile manufacturing and assembly project in Hai Phong is considered this year’s highlight for not importing auto accessories directly from China. Since VinFast witnessed positive sales in early 2020, the automaker strives to increase production output, especially when purchasing demand is growing well at the end of the year.
VinFast is on the upswing
Mastering the car core production stages, VinFast is not heavily affected by disrupted supply chains. On the contrary, this is an opportunity for VinFast to prove its position as an independent automaker when competing with domestic enterprises.
In early 2020, the government’s policies to support domestic automobile manufacturers are expected to boost VinFast international development. Specifically, raw materials, materials, and components not yet produced domestically for production, making (assembly) supporting products for the automotive manufacturing and assembly industry are free of import fees. In addition to reducing the registration fee by 50% for domestically manufactured automobiles, the government extended the limit time when paying special consumption tax on cars manufactured or assembled domestically from March 2020. Thanks to these incentives, domestic automakers can reduce their assembly costs and vehicle selling prices, which increases their competitive advantage compared to imported cars.
Also, VinFast’s exclusive tax exemption proposal initiates the company’s international market development. Specifically, imported components for the production of 200 cars of VinFast and 100 clusters of components exported abroad for testing activities are clear from import and export duties. The decree is a golden opportunity for VinFast to compete in potential international markets, encouraging domestic enterprises to improve production and expand export activities, especially when VinFast aims to export vehicles to the U.S in 2021. This promises to promote the commercial value of the Vietnam car industry in the future.