Vietnam a tough ride for Honda
HANOI - The motorbike division of Japan's
Honda Motor Co is struggling to blaze a trail in Vietnam, even
though motorbikes are the key mode of transport in the country
and sales are bucking an economic slowdown.
Haruo Takiguchi, general director of Honda Vietnam Co Ltd,
said high taxes and other costs along with tough localisation
requirements made it almost twice as expensive for Honda to
make a motorbike in Vietnam compared with nearby Thailand.
Bikes made by Honda in Vietnam also had to compete with
motorbikes assembled from imitated components or full units
smuggled across the country's land border, Takiguchi said.
Vietnam's market of 79 million people might have strong
potential -- which was why Honda built a manufacturing plant --
but the firm was unsure if it would invest fresh funds over the
next few years, Takiguchi told Reuters late on Tuesday.
His comments echo growing disenchantment among foreign
investors in communist-ruled Vietnam, who say the country is
one of the most expensive in Asia to do business. Vietnam says
it will lower costs, but over a period of years.
``We appreciate the efforts of the government, but still we have
many anxieties and difficulties,'' Takiguchi said.
Honda Vietnam is a 70:30 joint venture between the Japanese
giant and a local firm. It started making bikes last year.
Honda, which invested $47 million in the entity, had wanted to
set up a 100 percent owned company, but Takiguchi said the
government insisted it link up with a local partner.
LOCAL MARKET FLOODED WITH IMPORTS,SMUGGLED BIKES
Takiguchi said he was puzzled why Hanoi allowed the four
foreign investors manufacturing motorbikes in Vietnam to suffer
when they were helping develop a local components industry,
transferring technology and providing jobs.
Vietnam has banned the import of fully assembled motorbikes,
but allows completely-knocked-down units (CKD) to enter,
which Takiguchi said was a key problem.
He said some 25 local firms were bringing in large numbers of
CKD bikes from China, and many of these were made up of
imitated parts that sold for less than $1,500 when assembled.
Honda Vietnam's flagship, the Super Dream, sells for $1,990.
Those CKD imports along with the smuggling of
30,000-40,000 fully built units each year meant Honda and the
other three foreign bike makers accounted for only 40 percent
of total annual demand, Takiguchi said without providing exact
figures.
``We cannot understand why the door is open to these imports
when they do not contribute to the local economy,'' he said.
In addition, Honda Vietnam was required to start making engine
components -- which means expensive technology -- within six
years, something that took 15 years in Thailand where Honda
has capacity to make one million bikes a year, Takiguchi said.
That investment would come from retained profits, he said.
To make matters worse, Hanoi now wanted Honda Vietnam to
drop its retail prices, something Takiguchi said was impossible
without lower costs and greater sales volumes.
Last year Honda sold 80,000 units and hoped to sell 100,000
this year, rising to 140,000 next year, Takiguchi said, adding
that the firm was making a slight profit. He gave no details.
He said Vietnam's economic slowdown was not a problem
because Vietnamese placed so much value in a motorbike, as a
vital mode of transportation and a family asset.
Reuters - October 26, 1999.
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