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18th June 2019

Vietnam launches an automotive brand

Real-estate entity Vingroup JSC’s auto unit VinFast marked the arrival of its first vehicles from the assembly line this week, embodying the aspirations of the fast-developing country’s government to build a modern manufacturing sector.

VinFast, which will start delivering cars to customers Monday, wants to be the first company in Vietnam to succeed at rivalling foreign competitors such as Toyota Motor Corp., Ford Motor Co. and Honda Motor Co. in one of the world’s fastest-growing economies. Xuan Kien Automobile, known as Vinaxuki, failed to win over brand-conscious Vietnamese with its local car models before folding in 2015.

The first VinFast rollout, a hatchback named Fadil, is initially priced at 394.5 million dong ($16,900). Vingroup said in 2017 it planned to invest up to $3.5 billion in its auto business. The company will also produce a sedan, sport utility vehicle and electric motorbikes.

The new automaker, though, faces challenges in Vietnam’s aspirational culture. “Product quality is a concern” among consumers, said Truc Pham, a senior analyst at ACB Securities JSC in Ho Chi Minh City. “Vietnamese people favour known brands from overseas for high-value products. It will take years for customers to accept a new local brand.”

VinFast plans to make 250,000 vehicles during their first run, with projected production increasing to 500,000 vehicles a year by 2025. Last year, the company said it expects to begin exports in mid-2020.

The company said it received 10,000 vehicle pre-orders one year ago. Vietnam purchased 119,497 new vehicles in the first five months of the year, an 18% jump from the year-earlier period, according to the Vietnam Automobile Manufacturers’ Association.

The vehicles are not entirely built in Vietnam. The Fadil uses the chassis of the Karl Rocks model by PSA Group’s Opel. The sedan and SUV are built on frames from BMW AG, designed by Italian design house Pininfarina and have components engineered by Magna Steyr. Jim Deluca, the former vice president of global manufacturing for General Motors Co., was hired as VinFast’s chief executive officer.

Vingroup embraced the government’s aspirations to see domestic manufacturers make high-value products for the nation’s growing middle class in an economy that has expanded at an average clip of 6.6% since 2000 -- boosting annual incomes to almost $2,600 from about $400.

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