Ford Sees Long-Term Opportunity in Vietnam’s Auto Industry

By Edward Barbour-Lacey

HCMC – The Ford Motor Company has announced that it is strongly optimistic about the business and investment environment of Vietnam and expects that it will see continued and growing success in the country. According to Ford Vietnam’s Managing Director, Jesus Metelo Arias, the company is “committed to long-term investment and operations in Vietnam thanks to the country’s favorable investment climate.”

Vietnam’s healthy economic growth rate, growing consumer class, and ongoing infrastructure improvements have all helped drive Ford’s success in the country.  Arias also cited Vietnam’s simplification and transparency of tax and customs procedures as key reasons for the company’s optimism about the future of its operations in the country.

Additionally, auto sales have been climbing in Vietnam due in part to the country’s lowering of interest rates and improved liquidity throughout the economy. Vietnam has a fast growing middle class, with rising wages and a desire to move beyond the more common forms of transportation such as motorbikes. Many analysts believe that the country will go through a period of “automobilization” once annual per capita income rises above US$3,000.  Vietnam will soon reach this tipping point – incomes are seeing strong growth year over year. 

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Ford was one of the first American companies to invest into Vietnam after the two countries normalized relations in 1995. The global car manufacturer has seen strong growth in its vehicles sales over the previous years, and 2015 is proving to be no exception to this upward trend. In the first six months of this year, Ford sold 8,900 vehicles in Vietnam – a 70 percent increase over the same period last year. The company is now one of the top three selling brands in the country; the Ford Ranger pickup truck is the company’s bestselling product.

Ford is not the only American auto company that has met with success in Vietnam, GM has been operating in the country since 1993, when it started a joint venture with a Vietnamese state-owned enterprise. In addition, despite an increasingly competitive auto market throughout the ASEAN region, Vietnam has stated that it intends to work aggressively to build up its own domestic auto industry.  Fueling this decision is the fact that, if the country relies solely upon imports, the foreign exchange balance will be negatively affected.  Additionally, the auto industry has the potential to create thousands of jobs for locals and create a strong system of supporting industries.

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In yet another positive sign for foreign auto manufacturers, due to the ASEAN Trade in Goods Agreement, Vietnam will cut its car import tariff incrementally over the next four years for goods originating in ASEAN countries. The current import tariff of 50 percent is expected to be reduced to 35 percent in 2015, 20 percent in 2016, 10 percent in 2017, and will be zero in 2018. However, despite these tariff reductions, Vietnam’s National Assembly has announced that the special consumption tax will remain at current levels.

Ford’s Vietnam website can be viewed here.

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