Wednesday, July 27, 2011

Vietnam motorcycle sector gets timely boost

By Stephen Moore
Published: July 25th, 2011

Vietnamese motorcycle production grew by 14% in 2010 to reach 3.51 million units making it the world's fourth largest motorcycle market behind only China, India and Indonesia. Further, year-to-date growth of 13.2% has been recorded in 2011. Buoyed by this strong growth, Honda (Hamamatsu, Japan) has committed to building its third motorcycle plant in the country.

Vietnamese motorcycle market continues to fly forward.

The average scooter employs approximately 3-4 kg of polypropylene (PP) and a similar quantity of acrylonitrile-butadiene-styrene (ABS) so this additional production capacity in Vietnam is good news for local molders.

Honda began motorcycle production in Vietnam in 1997 and by 2011, reached total annual production capacity of 2 million units. Honda has an overall 50% share of the local market and a 64% share of the market for motorcycles manufactured by foreign-invested manufacturers; there are four of them. Honda's operations in Vietnam are a joint venture with Vietnam Engine Agricultural Machinery Corporation (VEAM).

The addition of the third Honda plant will further increase the company's annual production capacity to 2.5 million units when it becomes operational in the second half of 2012 in Ha Nam Province, approximately 40 kilometers south of Hanoi. The new plant will be built with an investment of $120 million.

Motorcycles have been an integral part of people's daily lives in Vietnam, and further expansion of the market is forecasted as the economy continues to grow. Market watcher IMA Asia (Singapore) forecasts GDP growth to average 7.3% per annum through to 2015 and it could be higher save for weak fiscal and monetary policy that has driven inflation up to 20% per annum and place continued pressure on the Vietnamese Dong. "80% of transactions in Vietnam are conducted with the U.S. dollar," says IMA Asia director Richard Martin. "And three or four time a year, a gap opens up between the official and black market rates forcing the government to devalue." Martin notes that the Dong is the only weak currency in Asia at

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