Vietnam: biker wars
Chinese and Japanese manufacturers battle for
Vietnam's fast-growing motorcycle market
HANOI - Swerve and slam on the brakes. That might
work to avoid collisions on Hanoi's chaotic streets, but
such erratic manoeuvres have sent Vietnam's economic
policymakers skidding into trouble. By suddenly
imposing tight quotas on imported motorcycle kits this
year, Vietnam has riled Japan and China and even
some powerful interest groups at home.
Hanoi officials describe the controls as an "emergency"
measure to curb traffic and reduce accidents, as they
work on long-term solutions to upgrade roads and offer
more public transport. The country's motorcycle sales
have surged thanks to growing prosperity, combined
with a price war between manufacturers. But as
inexperienced bureaucrats try to cope with this fallout
from free trade, their old central-planning reflexes have
provoked an uproar.
With production suspended at both local and
foreign-owned assembly plants, thousands of workers
have been left idle. "In the future we will have no
quotas," promises Nguyen Anh Tuan, deputy director
for project monitoring at Vietnam's Ministry of Planning
and Investment. But so far Hanoi hasn't budged from
this year's allocation of 1.5 million kits, despite threats
that this roaring mess will complicate Vietnam's bid to
enter the World Trade Organization.
Just last year, Vietnam was zooming into the limelight as
the world's third-largest market for motorcycles after
China and India--displacing Indonesia, a country with
nearly three times Vietnam's population. Just as in
Indonesia, both Japanese and Chinese manufacturers
were eagerly vying for Vietnam's market. The Chinese
have primarily relied on dozens of Vietnamese
assemblers to import their motorcycle kits, while the
Japanese have invested heavily into local assembly
plants run by joint-ventures.
The battle assumed familiar patterns: initial dominance
by expensive Japanese bikes, then an invasion of
cheaper Chinese models, followed by Japanese parries
to reduce prices and launch new styles. Last year
Chinese kits accounted for 78% of the total 2.5 million
imported, up sharply from 28% two years earlier.
That's not even counting the multitude of bikes believed
to be smuggled over the Chinese border. A turning
point came in late 2001, when Honda Motor launched
its 11-million-dong ($730) Honda Wave Alpha. This
spurred strong demand among consumers who
previously had only been able to afford Chinese bikes,
which cost from 7 million to 8 million dong.
Suddenly the road warriors were forced to abandon
their conventional tactics. Amidst concerns over alleged
evasion of import duties and lack of technical skill,
Hanoi refused to allow any of the local assemblers to
import motorcycle kits from January to mid-August this
year--indirectly dealing a stunning blow to the Chinese.
That decision idled more than 10,000 workers and
shocked the heavy-hitters in the local industry. Most of
these assemblers are state-owned and some are linked
to Vietnam's military, the public security ministry, the
youth union, and the veterans' association.
Motorbike industry executives include the son of a
former deputy prime minister and the grandson of a
former Communist Party chief. Surprisingly, such stellar
connections proved useless. That left the market wide
open for Japanese bikes, especially the low-cost
Honda Wave Alpha. But in September, Hanoi
blindsided the Japanese manufacturers with new quota
restrictions. In Honda's case, its allotted quota of
280,000 kits was especially jolting because the
company had received prior approval from local
officials in Vinh Phuc province, where Honda's plant is
located, to churn out 580,000 bikes in 2002.
Diplomatic pressure
The Japanese have been the most outwardly irate,
holding press conferences in Tokyo to demand bigger
quotas and wailing over suspended production at the
Honda and Yamaha Motor plants. Behind the scenes,
however, the local assemblers remain unhappy with
their new quota of 900,000 kits and the Chinese have
been busy lobbying the decision-makers. "We have
talked to them many times. We are very concerned
about this," says Hu Suojin, first secretary of the
economic and commercial section at the Chinese
embassy in Hanoi, referring to negotiations "at all levels"
in both Vietnam and China.
The Chinese believe that they should be rewarded for
making motorbikes affordable for Vietnamese farmers
while forcing the Japanese to reduce costs. For their
part, the Japanese believe that they should get credit for
producing bikes that are of higher quality than the
Chinese models, while accelerating localization of
components. Contrary to previous government
statements, Deputy Director Tuan says that the
Japanese have fulfilled their commitments to transfer
technology and localize parts. The main problem, he
insists, lies in their failure to submit financial reports
prepared by an outside auditor, as well as to invest as
much as they initially promised.
By Margot Cohen - The Far Eastern Economic Review - October 31, 2002.
|