In this webinar, Dr Ivan Small examined the emerging infrastructure and market for automobiles in Vietnam and how the public and experts are anticipating them in the wake of AFTA, RCEP, and other trade agreements and policies that are reshaping the country’s urban and peri-urban transportation landscapes and everyday living patterns.
VIETNAM STUDIES PROGRAMME WEBINAR
Monday, 5 April 2021 – The ISEAS – Yusof Ishak Institute organised a webinar on “Emerging Auto-Mobility Landscapes and Transportation Infrastructures in Vietnam” on Monday, delivered by Dr Ivan Small. Dr Small is a Visiting Senior Fellow with the Vietnam Studies Programme at the ISEAS-Yusof Ishak Institute, and an anthropologist and associate professor currently on sabbatical leave from the Central Connecticut State University in the US. Dr Small was also previously a Fulbright-Hays Fellow with the Department of Anthropology at the University of Social Sciences and Humanities in Ho Chi Minh City.
Dr Small noted that Vietnam is today an industrialised country, having recently achieved middle-income status. It has grabbed attention in the last decade or so for its strategic elevation of value across regional and international supply chains, with motorcycles and the expansion of traffic becoming one of the metaphors for the increasing circulation of capital in Vietnam’s globally integrated economy.
Vietnam is one of the largest motorcycle markets in the world, and the demand for motorcycles is often regarded as a symbol of the growing middle class in the country. Dr Small acknowledged that the motorcycle has indeed changed the lives of those living in both urban and rural areas, and paved the way for the development of new suburban and exurban districts. While motorcycle sales remain robust, Dr Small noted that numbers have flattened, paving the way for the automobile.
The auto industry, Dr Small explained, first set its sight on the Vietnamese market in the 1990s, when a number of foreign ventures invested in Vietnamese manufacturing plants in anticipation of the country’s economic take off. The country’s strategic location in Southeast Asia also made it a promising manufacturing and export hub. The Vietnamese government, interested in leapfrogging up the production value chain, promoted the growth of the auto industry with tariff protections and incentives for local production. It hoped to encourage the manufacturing of CBU (completely built up) cars made with local parts, which would in turn fuel a lucrative domestic supply chain. Today, some 17 manufacturers have built factories or have entered into joint ventures with Vietnamese companies to manufacture cars. However, the majority of these cars are ‘completely knocked down’ (CKD) units, where Vietnamese factories assemble cars comprising mostly imported parts.
The opening of markets and Vietnam’s integration into the global economy, which benefits its manufacturing sector, has however reduced protective trade barriers designed to insulate and incubate the country’s emerging auto sector. Of great significance, Dr Small noted, is Vietnam’s accession to the ASEAN Free Trade Area (AFTA). This forced Vietnam to not just reduce, but completely eliminate tariffs on automobiles assembled in any ASEAN country. Auto ventures in Vietnam now face direct competition from companies manufacturing in Thailand – or at times even branches of their own company – which have larger economies of scale and higher production efficiency.
AFTA thus has forced many companies to rethink their strategy across Southeast Asia and Vietnam. This is particularly true, Dr Small noted, of Japanese manufacturers which have made significant investments in Thai production capacity and, until recently, dominated the market share in Vietnam. Others, in the face of new market conditions, have decided to retool their strategies to focus on niche markets. Mercedes-Benz, for instance, produces a limited number of cars in its Ho Chi Minh City plant by hand instead of using assembly lines, which require additional investment. Trying to market pride in Vietnamese workmanship, however, is not always easy in a country which prefers foreign imports over domestic products, even in the case of international brands.
It also remains to be seen how the implementation of the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will reshape Vietnamese and Southeast Asian market orientations, as supply chains across ASEAN and China become further integrated. Implementation of the trade agreements’ provisions will be gradual, but they will most likely further unify the strategies of automotive companies, especially those focused on the two growing markets of China and Southeast Asia.
Nonetheless, Dr Small noted that Vietnam is a market brimming with potential consumers for transportation and mobility service providers, with Vietnam and the broader Southeast Asian region in general being an exciting site of mobility transformation. For Vietnamese living in urban areas like Hanoi and Ho Chi Minh City, the experience of living with a motorcycle is transformative. Given the uncontrollable growth of cities, cars can likewise offer mobility as an escape to more balanced and sustainable suburban lifestyles.
However, the expansion of traffic has also led to congestion, pollution, and other growth dilemmas. Vietnam, Dr Small acknowledged, is determined to avoid the fate of its regional sister cities, such as Jakarta or Manila, which suffer under the congested weight of long histories of relatively unplanned urban expansion and motorisation. Vietnam’s Department of Transport, to this end, highlighted several key transportation challenges in the country: the slow development of road and public transport infrastructures, high growth of personal vehicles, inadequate and uncoordinated planning and management, and the lack of targeted control over vehicle ownership to manage traffic. Studies of Ho Chi Minh City’s infrastructure planning and rollout have also warned of weak and uncoordinated planning, which if left unaddressed will have long-term congestion consequences. The Ho Chi Minh City subway system and Hanoi metro system, for instance, are well behind schedule – both were slated to open by 2018 to coincide with the drop in auto tariffs imposed by AFTA, but still remain incomplete.
The webinar concluded with a Q&A session that discussed issues ranging from the management of stakeholders in Vietnam’s transportation and automobile development, the effect of increased automobile uptake on Vietnam’s demographics, the relationship between Vietnam’s mobility landscape and its urban planning, as well as the role of international investors and lenders in the development of Vietnam’s automobile industry.