Facing difficulties in manufacture and consumption, some big car manufacturers in Thailand and Indonesia are planning to find new market in ASEAN. Moreover, recently, LG Electronics- the world’s second largest television manufacturer also intends to move from Thailand to Vietnam.
According to Federal Thailand Industry –FTI’s figures, In 2014, 881,800 cars were sold in Thailand, decreasing 34% compared to 2013. That is the second year in two consecutive years the market is in recession. It was a strong effect to decrease the quantity of output produced in last year : 1,88 million cars (included quantity exported). In Indonesia, quantity sold also lightly decreased which caused reduction of the quantity produced from 1.4 million cars down to 1.3 million cars.
Except for the problem of production, Thailand investors are facing other difficulties, political depression has effected manufacture and trade,and highcosts of labor haverisen the price up. Besides, Thailand’s manufacturing capacity is full, if we want to increase it, we have to invest more. All difficulties above force cars manufacturers to seek for new producing places.
In ASEAN, there are two places which investors are considering to: Philippines and Vietnam. These are two populous countries have enormous potentiality. Hence, the investors still want to invest money in these two countries.
Many people think that this is a facile opportunity for Vietnamto intensively attract new investors, develop cars industry, accommodate domestic demand and export. In Vietnam, monthly figures on consumption which enterprises declared indicated that the growth still has not had signs of slowing down.
According to the monthly report in Jan 2014, VAMA forecasted industry’s consumption rate in 2014 would be about 120.000 cars and increase 9% compared to ones in 2013. However, the real number raised almost 158.000, increased 43%. The quantity sold in December achieved a new record when surpassing 20.000 cars and this is the 21th consecutive month when the industry’s quantity sold higher in comparison with the same period previous year .
Vietnam’s advantage is an enormously potential cars market.In forecast, after 2020 when nation’s income per capita overcomes 3000 USD, the demands of cars will break out. In Vietnam, there are two million of car types, rate of cars per capita is still low, in 2030 the quantity sold would overcome 1 million cars per year. In addition, the low costs of labor in Vietnam helps reducing the costs of manufacture.
LG chooses Vietnam to be the producing place instead of Thailand:
LG Electronics – the world’s second largest televisions manufacturer is planning to move manufactory from Thailand to Vietnam in this year because of efficient producing system, low costs and good logistics services.
In October 2013, LG was authorized to invest 1.5 billion USD to Vietnam for constructing factories in order to produce and assemble electrical goods.
In a phone interview with Reuters’ reporters, Mr. NiponWongsaengarunsri – LG’s marketing manager in Thailand revealed that LG want to construct a manufacturing “fortification” where produce new lines of TV like the main factories in Korea. And Vietnam is their best choice.
“We consider Vietnam as an ideal destination to invest. Low costs of labor is an important factor. However, decisive elements are quality and good logistics services” said Mr. Nipon.
Besides, Mr. Nipon also revealed that LG produces about 600.000 TV products per year in Thailand, cost about 8 billion baht (243 million USD). Among those products, there are about 100.000 for export.
Will Vietnam gain benefit?
Following the integration process, at the end of 2015,Asean Economic Community (AEC) will be established. It will give Vietnam opportunities to expand import and export market, attract investment and skillful labor force in ASEAN area.
Besides, Trans Pacific Partnership (TPP) is on negotiation stage with final rounds, will prospectively give opportunities to Vietnam’s economy. Free Trade Agreements (FTA) is and will be concluded which contribute to attract investment and stimulate export.
In that circumstance, Vietnam government continually gives special treatments to foreign enterprises investing in high technological fields, many big Manufacturer chose Vietnam to be manufacturing “fortification” or expanding investment. For instance, Samsung invested 11 billion USD for factories in Bac Ninh, Thai Nguyen, Ho Chi Minh city; Intel also declared production line of Haswell chip for desktop in Vietnam; expecting to accommodate 80% global demand within the next six months.
2014 is the year for transferringbig enterprises from China to Vietnam. Not only Samsung, Intel, Nokia… but also many enterprises in textile, shoes, are pouring billion USD to manufactories in Vietnam, even when they already have had large factories in China.
Considering Vietnam’s opportunities, many experts suppose that Vietnam should prepare thoroughly in order not to be disadvantageous in our own house, by enforcing science and technology, developing supportive industries and improving competitive ability. If we can do well these stages, Vietnam will receive chances from future transfers.
Finding the right business partner in Vietnam is also important. We recommend doing research on the reputation of the company and individual shareholders, corporate or individual, gathering publicly available company information, and performing background checks on key personnel to find potential risks in cooperation. Working with a reliable partner can help achieve economic benefits, saving time and money in business.
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