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Honda's Presence and Market Dynamics in Vietnam's Automotive and Motorcycle Industries

GOOVER DAILY REPORT September 7, 2024
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TABLE OF CONTENTS

  1. Summary
  2. Introduction to Honda Vietnam
  3. Market Share in the Vietnamese Automotive Industry
  4. Analysis of Key Honda Models in Vietnam
  5. Consumer Preferences and Market Dynamics
  6. Conclusion

1. Summary

  • The report titled 'Honda’s Presence and Market Dynamics in Vietnam’s Automotive and Motorcycle Industries' delves into Honda Vietnam’s operations, highlighting its dominance in the motorcycle sector and its competitive stance in the automotive market. It examines Honda’s joint venture with the Vietnam Engine and Agricultural Machinery Corporation (VEAM), its production facilities in Vĩnh Phúc, and its market share. Honda leads the motorcycle market in Vietnam due to high per capita motorcycle ownership, driven by economic and geographical factors. In contrast, in the automotive sector, Honda ranks seventh, behind brands like Hyundai and Toyota, due to reliance on imported parts which increase costs. The report also reviews specific Honda models like the Honda City, Honda CR-V, and Honda HR-V in the Vietnamese market, while analyzing consumer preferences and market dynamics.

2. Introduction to Honda Vietnam

  • 2-1. Joint Venture Formation

  • Honda Vietnam operates as a joint venture between Honda Motor Co., Ltd. and the Vietnam Engine and Agricultural Machinery Corporation (VEAM). This collaboration allows Honda to leverage local partnerships for enhancing its operations within the Vietnamese market.

  • 2-2. Production Facilities in Vĩnh Phúc

  • Honda has established significant production facilities in Vĩnh Phúc province, where it operates three motorcycle factories and one car factory. The combined annual output from these facilities reaches approximately 2.5 million units, catering to both domestic consumption and export demands.

  • 2-3. Market Leadership in Motorcycles

  • Honda holds the position of the top-selling motorcycle brand in Vietnam. The country has a high per capita motorcycle ownership due to various factors including geographical conditions and economic factors. Motorcycles make up more than 85% of the total motor vehicles in Vietnam, underscoring Honda's dominant presence in this market.

3. Market Share in the Vietnamese Automotive Industry

  • 3-1. Honda's Market Share Data

  • Honda, with 23,802 vehicle sales, ranks seventh in the Vietnamese automotive market based on data from the Vietnam Association of Automobile Manufacturers (VAMA). The top seller is Hyundai with 67,450 vehicles followed by Toyota with 57,414 vehicles. Other competitors include Kia, Ford, Mazda, and Mitsubishi, each surpassing Honda's sales.

  • 3-2. Comparison with Competitors (Hyundai, Toyota)

  • In comparison to its main competitors, Honda's market performance is significantly lower. Hyundai leads with 67,450 units sold, followed by Toyota with 57,414 units. Honda's position at 23,802 sales indicates a notable gap against these major brands, which may influence its competitive strategy within the market.

  • 3-3. Challenges due to Imported Parts

  • The Vietnamese automotive industry faces challenges arising from a high reliance on imported parts. In 2018, only 10% of parts used in locally produced vehicles were sourced domestically. This contrasts sharply with countries like Thailand and Indonesia, where local production rates reach up to 80%. Consequently, vehicles assembled in Vietnam, including Honda's, are generally more expensive than their foreign-built counterparts due to the cost of imports.

4. Analysis of Key Honda Models in Vietnam

  • 4-1. Honda City

  • The Honda City sedan was introduced in Vietnam on December 9, 2020, featuring three trims: the base 1.5 G, 1.5 L, and the high-end 1.5 RS, all equipped with a CVT. An additional E trim was added in April 2021. The facelifted version of the City was launched on July 4, 2023, along with the second-generation BR-V, continuing to offer the same three trims. However, the base-model E grade was discontinued. All grades of the City come standard with the Honda Sensing suite, reflecting a commitment to safety across its lineup.

  • 4-2. Honda CR-V

  • The sixth-generation Honda CR-V was launched in Vietnam on October 25, 2023, available in four variants: 1.5 G, 1.5 L, 1.5 L AWD, and 2.0 RS e:HEV. The petrol models, accommodating 7-seater configurations, are assembled locally at Honda Cars Vietnam's factory in Vĩnh Phúc, while the e:HEV variant is imported from Thailand. A standard feature across all grades is the Honda Sensing safety technology, ensuring elevated safety measures for all consumers opting for the CR-V.

  • 4-3. Honda HR-V

  • The Honda HR-V was launched in Vietnam on June 15, 2022, initially in L and RS Turbo grades, followed by the HR-V G grade on December 15, 2022. It is available with either a 1.5-litre petrol engine or a 1.5-litre turbo petrol engine, both paired with a CVT transmission. The Honda Sensing suite is standard on all models, showcasing Honda's continued focus on safety and advanced driving assistance technologies.

5. Consumer Preferences and Market Dynamics

  • 5-1. High Motorcycle Ownership

  • According to the analysis by CRI, Vietnam is one of the top four countries in the world with the highest consumption of motorcycles, ranking after India, China, and Indonesia. Motorcycles serve as the primary means of transportation for the Vietnamese population, with motorcycles accounting for more than 85% of the total motor vehicles in the country. This prevalence underscores a significant consumer preference for motorcycles over other forms of transportation.

  • 5-2. Economic and Terrain Factors

  • Vietnam's unique geographical and economic conditions significantly contribute to its high motorcycle ownership. The country features a long and narrow terrain, with 75% of its land being mountainous or highland. The eastern region is characterized by low topography. Additionally, Vietnam struggles with inadequate public transportation and poor road conditions, which further enhances the practicality of motorcycles as a preferred mode of transport. The economic context reveals that as a developing country, Vietnam has low per capita disposable income, limiting consumers' ability to purchase costly automobiles, thereby making motorcycles a more economical choice.

  • 5-3. Consumer Inclination towards Compact and Economical Vehicles

  • In light of the economic situation and terrain challenges, Vietnamese consumers show a strong inclination towards compact and economical vehicles. The demand for affordable and efficient transportation options drives the market towards motorcycles rather than larger, more expensive cars. Furthermore, the local production capabilities of manufacturers like Honda, which has established motorcycle production facilities in Vietnam, align with consumer preferences for cost-effective and accessible transportation alternatives.

6. Conclusion

  • Honda Vietnam’s robust presence in the motorcycle market is underpinned by its strategic local production in Vĩnh Phúc and the high demand for motorcycles due to Vietnam's economic and geographical conditions. However, in the automotive sector, Honda faces significant challenges from top competitors like Hyundai and Toyota, exacerbated by the dependency on imported parts which escalate vehicle production costs. Despite these hurdles, Honda’s diversified vehicle lineup, comprising models like the Honda City, Honda CR-V, and Honda HR-V, and its investment in local production facilities position it for prospective growth in Vietnam’s automotive landscape. Future exploration should assess the implications of shifting consumer preferences and policy changes on market dynamics. To improve competitiveness, Honda should consider further localization of its supply chain and maintaining a focus on cost-effective, compact vehicle solutions that align with consumer needs in Vietnam.

7. Glossary

  • 7-1. Honda Vietnam [Company]

  • Honda Vietnam is a joint venture between Honda and the Vietnam Engine and Agricultural Machinery Corporation (VEAM), operating three motorcycle factories and one car factory in Vĩnh Phúc province. It is the leading motorcycle brand in Vietnam.

  • 7-2. Honda City [Product]

  • The Honda City sedan, launched in Vietnam in December 2020, is available in multiple trims and is known for its compact size and fuel efficiency. A facelifted version was introduced in July 2023.

  • 7-3. Honda CR-V [Product]

  • The sixth-generation Honda CR-V, launched in Vietnam on October 25, 2023, is offered in multiple variants and is assembled locally in Vĩnh Phúc. It includes both petrol and hybrid models.

  • 7-4. Honda HR-V [Product]

  • The third-generation Honda HR-V was launched in Vietnam in June 2022, offered in multiple grades with both 1.5-litre petrol and turbo petrol engines. Known for its compact size, it caters to the urban market.

  • 7-5. Vĩnh Phúc [Location]

  • Vĩnh Phúc province is the site of Honda's car and motorcycle production facilities in Vietnam, playing a crucial role in both domestic consumption and export demands.

8. Source Documents