Ford Vietnam Announces $82 Million Investment in Switch From Motorbikes to Cars

Ford Vietnam has announced it is investing $82 million to increase production, which will speed up the transition to cars in a communist nation known more for the iconic motorbike.

The automaker will use the money to buy machines like internet-connected robots, add a body-and-paint shop to its factory outside Hanoi, and nearly double its workforce to approximately 1,000 people, Ford Vietnam said last week. The Southeast Asian nation is one of the biggest markets for motorbikes in the world, but cars are increasingly popular as more Vietnamese have the money to buy them for private use or to drive for Grab, the Uber of Southeast Asia.

In a nation of more than 90 million people, car sales reached 322,322 last year as of December, up 12% compared to the prior year, according to the Vietnam Automobile Manufacturers Association, or VAMA.“

The new investment in local production will help us grow even further,” Pham Van Dung, managing director at Ford Vietnam, said. He added: “We take pride in having been one of the first foreign companies to invest in Vietnam in 1995.”

The U.S. carmaker entered Vietnam after Washington ended its trade embargo on the nation that had defeated it two decades prior in the Vietnam War.

Ford Vietnam said it would spread out the investment over two years and nearly triple the capacity, to 40,000 vehicles a year, at its factory in northern Hai Duong province.

The increase in cars on Vietnamese roads has many concerned about the subsequent increase in air pollution and road congestion. For instance there are already almost 10 million people in the mega city of Ho Chi Minh City, where traffic jams are particularly evident this week as Vietnamese make their way out of town for Tet, the Lunar New Year.

However the authorities want Vietnam to develop its own domestic car production business. Most auto brands import whole cars from Thailand or Indonesia, or car parts to be assembled inside Vietnam. Imports have increased ever since the 10-member Association of Southeast Asian Nations agreed to decrease auto tariffs to zero in 2018.

Vingroup, the nation’s biggest conglomerate, has been producing a Vietnamese car, Vinfast, with technology from German brands like BMW and Bosch. Vingroup founder and Vietnam’s richest man Pham Nhat Vuong said recently he was willing to invest $2 billion of his own money to ensuring Vinfast is a success.

It will have a lot of catching up to do in the domestic car market, which is dominated by foreign brands, according to Saigon Securities Inc SSI, an investment brokerage firm.“

In terms of car brands under VAMA, Ford and Honda are competing fiercely for the top spot,” Saigon Securities Inc SSI said in an analysis of the auto market.

Honda makes four-wheel cars as well, but is so well known for motorbikes in Vietnam that locals simply refer to their bikes as “Hondas,” no matter the brand.

On the other hand Ford Vietnam is more focused on sedans, trucks, sports utility vehicles, and seven-seat commercial vans, as the nation’s rising middle class gets even bigger. The automaker said its new investment would also go toward upgrading its trim-and-final shop, rearranging its logistics area, and increasing efficiency and eco-friendly operations.

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