Motorbike industry in awkward situation

Vietnam is among nations with the highest ratio of using motorbikes in the world, many companies have extended investment to raise their market shares for the last several years. However they have met challenges because of the motorbike market’s saturation with supply far exceeding demand and the Government’s policy of limiting private vehicles to ease overloaded traffic infrastructure.
 
Motorbike market has entered saturation phase in Vietnam (Photo: SGGP/ Financial Investment)

Vietnam consumes an average of three million motorbikes a year and the number has continuously decreased for the last four years.

Over 3.6 million motorcycles were registered nationwide in 2011, which fell to 3.3 million, 3.2 million and below 3 million in the three following years, reported the Registration Department.

Annual production capacity reaches 4-5 million. Ninety percent of motorbikes sold in Vietnam last year belonged to five giants Honda, Yamaha, Piaggio, Suzuki and SYM--member of Vietnam Association of Motorcycle Manufacturers (VAMM). The rest ten percent went to other domestic manufacturers.

Experts forecast that the motorbike market this year will continue facing many difficulties, challenges and fiercer competition. Consumption is predicted to reduce to 2.7-2.8 million.

Manufacturers have introduced many new designs and versions to maintain and broaden their market shares. Last year, the top five companies launched over 20 new versions. Meantime shops have provided promotional programs and discounts but still failed to increase their sales.
 
Many shops have fallen in unsold condition and were forced to close down.

In a transport industry’s plan by 2020, the number of motorbikes will approximate 36 million. Still, a latest data showed it had already totaled 43 million by the end of 2014, seven million higher than the Government-approved plan.

Ho Chi Minh City alone has 7 million registered motorcycles excluding those from other provinces.

Big cities including HCMC and Hanoi have strongly invested in traffic infrastructure. However traffic jam and accidents have still been permanent issues.

Amid weak infrastructure and the slow development of satellite urban areas, experts worried that if the number of motorbikes continues increasing, it will hamper socioeconomic development and investment environment.

Therefore, traffic plans will comprise various administrative, economic and technical measures to limit private vehicles, leading basically change urban appearance.

Motorbikes will mainly be used in rural areas where public transport has not developed.

Deputy Minister of Transport Le Dinh Tho said that the ministry has proposed the Government to develop the motorbike industry in accordance with sustainable ways. Of these, private vehicle restriction and public transport development are big issues, concerning manufacturers.

At a meeting with leaders from the Ministry of Transport in mid 2014, director general of Honda Minoru Kato said that the restriction would put more pressure on the Government to develop public transport, affecting the industry’s annual contribution rate to the country’s Gross Domestic Product and Vietnam’s motorbike export.

Manufacturers have been forced to seek ways to boost exports, which is considered as a survival factor to prevent the worst scenario of plant shutdown or production scale shrink.

The motorbike industry has increased localization rate to 90 percent. This is an advantage for manufacturers in Vietnam to compete in their rivals in prices in both local and oversea markets.

According to a motorcycle industry development plan by the Ministry of Industry and Trade for the phase 2016-2020, motorbikes and accessories' exports will yield US$500-800 million by 2020.

By Minh Tuan – Translated by Hai Mien

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