Foreign tire manufacturers have flocked to Vietnam with plans to turn
the country into their production base as well as a new consumption
market, the English language news website VietNamNet Bridge reported.
According
to tirebusiness.com, the Vietnamese market’s scale is rather small,
with a value of 800 million USD. That’s miniscule compared with the 235
billion USD world market.
However, this does not mean that the
market will remain small forever. Quite the opposite: foreign investors
are seeing great opportunities to make profits in the Vietnamese market.
Analysts
say domestic manufacturers currently hold 40 percent of market share,
while foreigners hold 60 percent. That larger share includes the most
lucrative market segment, passenger car tires, which have selling prices
much higher than other products because of the high technologies
required.
According to Huynh Tan Vuong, Marketing Director of
Kumho Tire Vietnam, the Vietnamese market has great potentials, with an
annual growth rate of 20-25 percent. The promising market has attracted
the world’s leading tire manufacturers: Bridgestone, Michelin, Kumho,
Yokohama and Goodyear.
The Republic of Korea’s Kumho recently
announced its plan to pump an additional 100 million USD into Vietnam to
expand its tire factory in Binh Duong province, which had initial
funding of 200 million USD. Once the expanded investment, slated for
2015, is completed, the factory will churn out 5.6 million products a
year, nearly double its current output of 3 million.
The Japanese
Bridgestone has received an investment license to increase the
investment capital of its factory in the northern city of Hai Phong from
574 million USD to 1.2 billion USD.
The factory has an expected
capacity of 9 million products per annum, or 9 times bigger than
Vietnam’s Casumina’s Radial, to be reached by 2017. Meanwhile, the first
commercial batches of goods are expected to hit the market by June.
The
most outstanding feature of Kumho and Bridgestone-made tires is that
they are radial tires made with modern technologies. Domestic
manufacturers make mostly bias tires, using Chinese technologies.
The
two manufacturers not only have been making money with passenger car
tires, but also trying to make tires for pick-ups and vans, a market
segment long considered the “playing field” of domestic enterprises.
A source said that the products now amount to 23 percent of Kumho’s total products.
As the domestic market remains small, all the tire manufacturers have been boosting export to earn more money.
Vuong
of Kumho Tire Vietnam said more than 95 percent of the company’s
products are exported to the Northern American markets, the Middle East,
Asia and Australia. The same percentage for export is expected by the
managers of Bridgestone’s factory in Hai Phong city.
Vietnam,
with its cheap labour force, abundant rubber supply and zero export
tariff (versus 8 percent in China) provides great advantages to the tire
industry.
The Southern Rubber Industry Corporation (CSM) in the
south, the Da Nang Rubber JSC (DRC) in the central region, and Sao Vang
Rubber JSC (SRC) in the north are the three biggest Vietnamese
manufacturers in the field.-VNA