In terms of automotive manufacturing, the Vietnamese Government is seeking to encourage greater domestic production of automobiles and parts and has articulated a policy goal for the period of 2010 – 2015 of achieving both complete import substitution of vehicles and the exporting of parts, components and non-luxury vehicles.

According to economic downturn, Vietnamese economy faced many severe challenges last year but thanks to measures initiated by the government, it performed well. In terms of automotive manufacturing, the Vietnamese Government is seeking to encourage greater domestic production of automobiles and parts and has articulated a policy goal for the period of 2010 – 2015 of achieving both complete import substitution of vehicles and the exporting of parts, components and non-luxury vehicles. As a result, a number of automobile manufacturers have decided to increase their investment capital in order to raise output to meet the increasingly high demand.

In fact the automobile manufacturers owe clients 10,000 units, and that several manufacturers still have many orders. The sedan output would reach 100,000 units a year by 2010. With such a big market scale, enterprises will be able to push up the localization process, which can help reduce selling prices.

Vinaxuki proves to have the most ambitious investment plan. It has invested VND450bil in making vans recently, and the localization ratio of its vans has reached 40% (40% are made locally). Vinaxuki has leased 20 ha of land in Dong Anh district in Hanoi to run its project on making cars with less than nine seats capitalized at VND930billion. Vinaxuki is also planning to set up a 250 ha factory in Nghi Son Economic Zone specializing in making car parts, accessories and engines, which will help raise the localization ratio. It is estimated that Vinaxuki will spend VND2tril on its projects and its first cars will be churned out by 2010.

According to the Ministry of Industry and Trade, in 2020-2025, Vietnam’s automobile market will boom as less-than-10-seat cars will dominate the market. MOIT has estimated that by 2015 there will be 28 cars per 1,000 people, while the figures will be 38 and 88 by 2015 and 2020, respectively. As such, the motorisation period in Viet Nam will occur between 2020 and 2025.

Also according to MOIT, Viet Nam will have 166,000-235,000 automobiles joining the market by 2015, 246-347,000 cars by 2025 and 592-836,000 by 2025. Of these, buses and trucks will account for 27%, while cars for personal use 73%. Currently, the ratio is 46% vs. 54%, and it is expected to further increase in the immediate time, but will decrease later.

Furthermore, the Auto-Parts Export Center of Toyota Motor Vietnam Co. (TMV) has reported its 2008 exports of about US$25 million, up 10% year-on-year, taking to over US$92 million the total amount in 4.5 years since the center’s start-up. The items are now exports to Thailand, Indonesia, Philippines, Malaysia, India, Argentina, South Africa, Venezuela, Taiwan and Pakistan are electric control EGR valves, antennas and accelerator pedals.

In these markets, Toyota’s international multipurpose vehicles (IMV) are being produced. In addition to these vehicles, TMV’s export products are used for Vios, Yaris, Altis and Hiace, according to the company. The auto-parts export center, which was commissioned in the northern province of Vinh Phuc as the first such facility to be established by an automaker in Viet Nam, outsources contracts to local companies to manufacture auto parts, then labels the products and finally ships them to overseas assembly plants where IMVs are made.

Moreover, KLD Motors America Inc. plans to open an assembly plant in Hanoi by the fourth quarter of 2009 to supply Viet Nam Sufat Co. Ltd. with at least 2,000 motors per month. Last week, the parent company, KLD Energy Technologies Inc., closed on a $1 million round of series A financing from a syndicate of angel investors. Also, Austin-based KLD Energy, founded in 2007, plans to use the capital to ramp up development of its transmissionless motor system that would be assembled in Viet Nam for Sufat scooters, stated KLD CEO. Later this year KLD is expected to raise an undisclosed amount of series B venture capital to fund the plant, emphasized KLD CEO.