The Vietnamese government is seeking to develop a cycle of domestic manufacturing, hoping that sales of locally made products will help its industries climb up the technology ladder and create employment.It is understood that a variety of tax breaks and other incentives are being extended to big domestic groups with an aim to promote domestic production.
Many Vietnamese companies have been expanding businesses to offer more “Made in Vietnam” products of good quality in line with the government’s goal of turning the country into a manufacturing powerhouse by 2020.
The latest move was marked with the manufacturing of electric motorbikes and smartphones and is set to enter the automotive industry in June by real estate conglomerate Vingroup.
Lux SA 2.0, a Vinfast car. Photo: Vingroup
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Vingroup’s foray into the smartphone market has been remarkable. Its smartphone plant has started operation in the northern coastal city of Haiphong.
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In 2015, software developer Bkav launched Bphone, Vietnam’s first domestically made smartphone. In October, Bkav put the third-generation model of the Bphone on the market.
Foreign support remains strong
Many domestically made products remain heavily dependent on foreign parts and technologies. It reflects the long path the country has to travel before becoming a full-fledged industrial power.
Vingroup’s Klara electric bike is made with the collaboration with companies such as BMW, Robert Bosch, and Siemens.
A group of 20 European businesses are helping Vingroup produce the bike, and around 200 German engineers are currently working at Vingroup’s plant in Haiphong. Meanwhile, an Italian design studio that has worked for Ferrari and other European marques is in charge of designing VinFast cars.
Most of the parts have to be imported, as the country lacks a developed car manufacturing supply chain.
Vingroup’s smartphone Vsmart, on the other hand, is made thanks to the teaming up between the conglomerate and Spanish maker BQ. Vingroup has enlisted the help of Qualcomm and Google for its smartphone business.
Bphones. Photo: Bkav
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Truong Hai, a contract manufacturer for Mazda Motor and Kia Motors, has joined a technological tie-up with South Korea’s LS Mtron.
Well-designed brand strategy needed
Some analysts, however, have questioned the sustainability of this approach.
“What Vietnam needs to do is to accelerate technology transfers to small and midsized companies for long-term development, instead of providing special incentives to specific large companies,” said a Hanoi-based Japanese consultant.
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Manufacturers in emerging markets often look to foreign powerhouses for support in accelerating their growth and evolution. Generally, industries begin the shift toward domestic production after they have acquired sufficient expertise and built up a dependable network of domestic suppliers.
Although some analysts say that Vietnam’s push to establish full-fledged domestic production by 2020 is too ambitious, the blueprint has been in place for years.
