Q2 2016 www.bmiresearch.com VIETNAM AUTOS REPORT INCLUDES 5-YEAR FORECASTS TO 2020 Published by:BMI Research Vietnam Autos Report Q2 2016 INCLUDES 5-YEAR FORECASTS TO 2020 Part of BMI’s Industry Report & Forecasts Series Published by: BMI Research Copy deadline: January 2016 ISSN: 1749-0286 BMI Research Senator House 85 Queen Victoria Street London EC4V 4AB United Kingdom Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@bmiresearch.com Web: http://www.bmiresearch.com © 2016 Business Monitor International Ltd All rights reserved All information contained in this publication is copyrighted in the name of Business Monitor International Ltd, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International Ltd accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication All information is provided without warranty, and Business Monitor International Ltd makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained Vietnam Autos Report Q2 2016 INCLUDES 5-YEAR FORECASTS TO 2020 Part of BMI’s Industry Report & Forecasts Series Published by: BMI Research Copy deadline: January 2016 ISSN: 1749-0286 BMI Research Senator House 85 Queen Victoria Street London EC4V 4AB United Kingdom Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@bmiresearch.com Web: http://www.bmiresearch.com © 2016 Business Monitor International Ltd All rights reserved All information contained in this publication is copyrighted in the name of Business Monitor International Ltd, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International Ltd accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication All information is provided without warranty, and Business Monitor International Ltd makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained Vietnam Autos Report Q2 2016 CONTENTS BMI Industry View Key Views SWOT Industry Forecast 11 Table: Autos Total Market - Historical Data And Forecasts (Vietnam 2014-2020) 11 Latest Developments Structural Trends Government Is Prioritising The Supplier Segment Passenger Vehicles 11 11 18 19 Table: Vietnam Passenger Car Market - Historical Data And Forecasts 19 Commercial Vehicles 20 Table: Commercial Vehicle Market - Historical Data And Forecasts (Vietnam 2014-2020) 20 Latest Developments 20 Table: Key Players: Selected VAMA Members - Commercial Vehicle Sales For 10M14 22 Industry Risk Reward Ratings 23 Industry Risk/Reward Index South East Asia Shines 'Make In India' Supports Ranking Vietnam Still Most Likely Frontier Mover 23 23 24 24 Company Profile 25 GM Vietnam 25 Mercedes-Benz Vietnam 26 Regional Overview 27 Table: Asia Autos Production Investment 27 Incentives Powering Chinese Investment 28 Making In India Is Increasing Localised 29 Demographic Forecast 30 Table: Population Headline Indicators (Vietnam 1990-2025) 31 Table: Key Population Ratios (Vietnam 1990-2025) 31 Table: Urban/Rural Population & Life Expectancy (Vietnam 1990-2025) 32 Table: Population By Age Group (Vietnam 1990-2025) 32 Table: Population By Age Group % (Vietnam 1990-2025) 33 Methodology 35 Industry Forecasts 35 Sector-Specific Methodology 36 Sources 36 © Business Monitor International Ltd Page Vietnam Autos Report Q2 2016 Risk/Reward Index Methodology 37 Table: Automotive Risk/Reward Index Indicators And Weighting Of Indicators 38 © Business Monitor International Ltd Page Vietnam Autos Report Q2 2016 BMI Industry View BMI View: Higher imported car taxes could well lead to a slowing in growth within Vietnam's new vehicle sales market over 2016 from the elevated levels seen in 2015 However, given strong domestic demand and a robust economic backdrop, we believe the market can still show solid growth of 16%, with commercial vehicles outperforming passenger cars Industrial Growth Favouring Commercial Vehicle Segments Vehicle Sales By Segment, Units 400,000 75 300,000 50 200,000 25 100,000 0 2013 2014 2015f 2016f 2017f 2018f 2019f Passenger car sales, units (LHS) Commercial vehicle sales, units (LHS) Passenger car sales, units, % y-o-y (RHS) Commercial vehicle sales, units, % y-o-y (RHS) e/f=BMI estimate/forecast Source: BMI/VAMA Key Views ■ This quarter, BMI has extended its forecast period to 2020 ■ Over this period, we expect 85% sales growth from the Vietnamese new vehicle sales market, with passenger cars (PCs) to outperform commercial vehicles (CVs) • Vietnam was the fastest-growing auto market in Southeast Asia over 2015, with 11M15 sales up by 58% y-o-y • For 2016, we are anticipating a slowdown in the stellar growth seen in Vietnamese auto sales over 2015 • The government is looking to slow the rate of new imported vehicle sales growth via the imposition of a new special consumption tax, which could increase the price of imported vehicles by up to 12%, according to media reports © Business Monitor International Ltd Page Vietnam Autos Report Q2 2016 • However, despite this measure, we believe that demand for new vehicles will remain robust from both Vietnamese consumers (boosting PC sales) and Vietnamese businesses (boosting CV sales) • Autos manufacturers have come under increasing scrutiny from the tax authorities in 2015 after media reports of tax evasion and relatively high transfer pricing abuse by local vehicle assemblers • Toyota is currently the leading brand in Vietnam, with its Camry, Corolla and Fortuner models are all popular • However, second-placed Thaco produces the country's top-selling vehicle, the Kia Morning © Business Monitor International Ltd Page Vietnam Autos Report Q2 2016 SWOT Vietnam Autos Industry SWOT Strengths ■ Low rates of vehicle ownership, together with Vietnam's large population, provide an opportunity for positive vehicle sales growth over the long term ■ Low manufacturing and labour costs ■ Loose monetary conditions and historically low interest rates provide a positive backdrop for sustained credit expansion ■ Strong FDI inflows into the manufacturing sector bode well for the industry • New vehicle sales grew at a stellar rate over 2015 • Strong demand for sub-compact and compact cars Weaknesses ■ Lack of production incentives means that the automotive sector is not performing up to its potential ■ Domestic supplier industry is not well developed, which results in automakers having to pay high import tariffs on imported parts ■ The still underdeveloped road network in the country means that two-wheelers remain a more sensible option for consumers ■ Motorbike sales will remain in a downtrend due to a lack of demand amid a saturated market and with many Vietnamese trading up to a small car • High taxes represent a barrier to new vehicle ownership • Vietnam remains a poor country ■ New vehicle ownership will remain out of reach for the majority of Vietnamese citizens across BMI's newly-extended forecast period to 2020 Opportunities ■ The market shows diversity, with long-term growth likely for both the © Business Monitor International Ltd Page Vietnam Autos Report Q2 2016 This means the two movers join Malaysia, which was already in the 'low risk, high reward' segment, largely as a result of its energy efficient vehicle (EEV) policy Although we don't expect this scheme to put Malaysia ahead of the likes of Thailand as a regional production hub, it is certainly a factor in our positive production outlook for the country, which continues to win investment, most recently attracting China's BAIC, which plans to use Malaysia as a hub for South East Asia (see 'EV Project Positive For Production Outlook', January 18 2016) 'Make In India' Supports Ranking The amount of investment into the Indian auto sector as a result of the government's 'Make In India' policy supports the country's position in the 'low risk, high reward' segment Increased production has fed through to an improved 'rewards' score and the policy itself is positive for the regulatory portion of the 'risk' element Adding to the longer term 'rewards' outlook, is our positive view of the Indian consumer as a bright spot, not only regionally, but globally We expect this to keep vehicle sales growth positive over our forecast period to 2020 (see 'India To Remain Shining Star Of BRICS', October 29 2015) Vietnam Still Most Likely Frontier Mover The other most crowded segment is the complete opposite, 'high risk, low reward' segment This is mostly populated by the more frontier markets in the region, but Vietnam has the most potential to make the move out of this segment given strong demand in the country It is held back, however, by the need to develop its production industry, particularly through the creation of a supplier network Vietnam is accompanied by countries that may have long-term potential but at the moment are still highly risky and have small new vehicle markets This includes Cambodia, Laos and Myanmar, where affordability means new vehicle sales will be limited for some time, while the business environment is also challenging for investors Although it has a reasonably well developed autos market in comparison, Pakistan is also in this quadrant Pakistan has a much improved sales and production outlook, but its component score for investment and trade openness is particularly low, as is its legal score Industry policy is also skewed towards incumbent producers, of which there are very few © Business Monitor International Ltd Page 24 Vietnam Autos Report Q2 2016 Company Profile GM Vietnam Latest Developments: ■ ■ ■ ■ ■ Company Overview GM Vietnam has a diversified presence over new and used car sales, production, servicing and auto parts, as well as over 20 years' experience of working in the local market Chevrolet models remain popular across both passenger car and commercial vehicle segments Company could look to increase domestic production if demand for vehicles rises over the medium term GM Vietnam retains a relatively small market share (3.5%) within Vietnam at present In 2016, the company will continue to face strong competition from Ford and other brands which have similar market share GM Vietnam Motor Company was established in 1993 by the former Daewoo Motor Corporation In 2011, GM Vietnam decided to align its operations to make Chevrolet its retail brand and sells its cars under that brand in the country However, it continues to provide after-sales care and spare parts for owners of Daewoo cars The company is headquartered in Hanoi's Thanh Tri district and has a manufacturing plant in the same proximity with an annual assembly capacity of 30,000 units GM Vietnam works with 17 dealers in major cities in the country and for the first 10 months of 2015 sold a total of 4,241 units of locally assembled vehicles, with its most popular model being the Cruze LS Strategy In September 2014, GM announced that it would be starting a triple car programme, the first of its kind in Vietnam Coined as '3+3+3', the programme seeks to provide three years of insurance, three years of free maintenance and an extended warranty of three years or 100,000km travelled (whichever comes first) In the same month, the company also launched a new car model, the 2014 Chevrolet Cruz, appealing to the compact sedans segment in the market The company is also looking to tap the taxi market and began assembling taxi cabs in 2014 - the Chevrolet Spark Taxi - specifically designed for Vietnam's city streets © Business Monitor International Ltd Page 25 Vietnam Autos Report Q2 2016 Mercedes-Benz Vietnam Latest Developments: ■ ■ ■ ■ ■ ■ Company Overview Mercedes-Benz Vietnam has a diversified presence over new and used car sales, production, servicing and auto parts, as well as 20 years' experience of working with Mercedes-Benz on the local market Mercedes-Benz announced that it had delivered 1,522 cars to customers in the first six months of 2015, posting a y-o-y increase of 37.6% Company could look to boost domestic production if demand for vehicles rises over the medium term Mercedes-Benz's market share in the premium segment currently stands at around 72% Mercedes-Benz's CV range is also proving increasingly popular Mercedes-Benz will remain one of the leading distributors of luxury cars within Vietnam over 2016 Mercedes-Benz Vietnam (MBV) is a joint venture between Daimler (70%) and Saigon Automobile Mechanical Corporation (30%) MBV is introducing passenger cars and commercial vehicles (CVs) to the Vietnamese market under the brand and standards of Mercedes-Benz MBV's factory is located in Go Vap District, Ho Chi Minh City The factory covers 105,000 square metres and has a production capacity of about 3,500 vehicles per year The factory includes a Training Centre, which carries out sales, marketing and technical training courses to ensure a high level of employee competence Mercedes-Benz announced it delivered 1,522 cars to customers in the first six months of 2015, posting a y-o-y increase of 37.6% The growth momentum came mostly from the new C-Class and the S-Class With 570 cars delivered, the C-Class is the brand's best-selling model in Vietnam in the first six months and took an 86% share of its competitive segment At least 233 S-Classes were sold during the same period, counting for 89% share of its premier league The significant growth pushed the Mercedes-Benz's market share in the premium segment from 54% to 72% Strategy In March 2014, MBV announced that it would invest USD10mn into Vietnam, out of which USD5mn would be used to develop new production lines, with the remainder for environmental equipment The company also plans to launch 18 new car models in 2014, which brings the tally of its luxury car models in Vietnam's showroom up to 40 Company Data Year established: 1995 General Director: Michael Behrens No of employees: 500-600 © Business Monitor International Ltd Page 26 Vietnam Autos Report Q2 2016 Regional Overview BMI View: In BMI's regular round-up of production investments, we track the latest projects from the production side of the industry and analyse regional trends we see developing In doing so, we hope to build a picture of any potential hubs that may be developing, as well as company strategy in terms of production bases and export programmes Table: Asia Autos Production Investment Date announced City/state/ Country region Company Value Brief description October 2015 India Bosch INR6.5bn (USD97mn) Strengthening Indian facilities and equipment FY2015 Nanjing Ford CNY11.4bn (USD1.8bn) Expanding R&D facilities and developing more localised vehicles 2015-2020 Beijing Faurecia/ Beijing WKW Automotive Parts CNY15.95mn (USD100mn) Creation of a 50:50 JV to manufacture aluminium interior components for clients such as Infiniti and Volvo na Axalta Coating Systems TBC Doubling of production capacity at existing Gujuarat coatings plant, plus addition of new coatings development laboratory 2016-17 BorgWarner na New production facility for transmission components to supply clients such as Hyundai and Kia, the firm's third in the country 2015 October 2015 October 2015 October 2015 October 2015 China China India South Korea TBC Gujarat Jincheon County Date Onstream October 2015 China Xi'an Samsung SDI CNY3.81bn (USD600mn) New plant for EV batteries with capacity to produce for 40,000 cars a year, supplying 10 car and truck manufacturers 2015-2020 October 2015 China Changshu Tata AutoComp CNY20mn (USD3.16mn) Second production facility in the country for vehicle components 2015 November 2015 China Shanghai SAIC CNY20bn (USD3.1bn) Design and production of 30 'green' models and components 2020 na Third Chinese plant for production of EV batteries, with annual production capacity of 50,000 battery packs 2015 USD50mn Doubling of motorcycle production capacity to 1.2mn units 2015-2018 Chongqing Chang'an CNY18bn (USD2.8bn) Development and production of 34 electric and plug-in hybrid models 2015-2025 Voestalpine EUR25mn (USD27.5mn) New plant for production of ultrahigh strength steel body-in-white parts for premium OEMs 2015 November 2015 November 2015 November 2015 November 2015 China Nanjing LG Chem Pakistan Sheikhupura Honda China China TBC Shenyang © Business Monitor International Ltd Page 27 Vietnam Autos Report Q2 2016 Asia Autos Production Investment - Continued Date announced November 2015 November 2015 November 2015 November 2015 City/state/ Country region Company Thailand Rayong Trelleborg Vibracoustic India China Tamil Nadu Jiangsu Thailand Rayong Value Brief description Date Onstream na New plant for production of engine mounts, chassis mounts and body mounts 2015 na Third motorcycle plant aimed at doubling total Indian production to 900,000 units a year 2018 Panasonic na New facility for production of diesel exhaust filters with an annual production capacity of 500,000 units 2015 Ford THB6.5bn (USD181mn) Second plant in the country aimed at doubling total Thai output to 300,000 units 2016 New plant for body-in-white technology and assembly systems for OEMs 2015 Royal Enfield November 2015 China Chuansha ThyssenKrupp na November 2015 China Hefei Continental EUR250mn (USD266mn) Expansion of existing facilities to raise annual output to 14mn tyres 2017 Haryana Yokohama Rubber Company JPY10bn (USD81.7mn) Long-term expansion of existing facility to raise annual tyre output from 700,000 to 3mn 2020 Chakan Volkswagen Development and production of a new compact car specifically for INR7.2bn the Indian market, including new (USD107.75m equipment and increased n) capacity 2016 Wuhan Dongfeng Faurecia November 2015 November 2015 December 2015 December 2015 India India China China Guiyuang Geely na New plant for the production of instrument panels, door panels and damping materials 2016 CNY5.6bn (USD875mn) New plant for production of methanol-powered cars with an annual production capacity of 100,000 units 2017 na = not available; TBC = to be confirmed Source: BMI Incentives Powering Chinese Investment China is the clear winner in this latest round-up of investment projects, with a combined value of at least USD9.57bn, plus other projects with an undisclosed value Many of the projects, and the biggest in particular, are related to 'green cars' or their components and are supported by the government's incentives for manufacturing in this area The project with the highest value will see Shanghai Automotive Industry Corp (SAIC) invest CNY20bn (USD3.1bn) in developing and producing 30 'green cars' and their related components by 2020 Similarly, © Business Monitor International Ltd Page 28 Vietnam Autos Report Q2 2016 Chongqing Chang'an will spend CNY18bn (USD2.8bn) on adding 34 electric and plug-in hybrid models to its range by 2025 It is not surprising that it is domestic manufacturers making these big investments, as we expect them to be the main, and indeed intended, beneficiaries of the incentives In terms of the electric car battery production, we see South Korean companies leading the charge with Samsung SDI and LG Chem both investing in local battery plants While this reflects an enthusiasm on the part of these companies to take advantage of the green car boom in China, it is perhaps also an indication of an area where the domestic industry needs to develop Making In India Is Increasing Localised While we have previously highlighted the 'Make In India' policy as a driving force behind the uptick in investment in the Indian autos sector over 2015, the type of projects show that the sector is moving towards increased localisation in its manufacturing The number of suppliers investing, for example, is a reflection of expected demand for locally produced parts and components This is taken a step further by Volkswagen, with its INR7.2bn (USD108mn) project to build a new compact car specifically for the Indian market This is actually the second phase of a INR15bn investment plan announced in 2013, which started with the construction of a local engine plant, again emphasising localisation with one of the most fundamental vehicle components A compact SUV and sedan designed for India are expected to follow in 2016 © Business Monitor International Ltd Page 29 Vietnam Autos Report Q2 2016 Demographic Forecast Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model Not only is the total population of a country a key variable in consumer demand, but an understanding of the demographic profile is essential to understanding issues ranging from future population trends to productivity growth and government spending requirements The accompanying charts detail the population pyramid for 2015, the change in the structure of the population between 2015 and 2050 and the total population between 1990 and 2050 The tables show indicators from all of these charts, in addition to key metrics such as population ratios, the urban/rural split and life expectancy Population (1990-2050) 150 100 50 2050f 2045f 2040f 2035f 2030f 2025f 2020f 2015f 2010 2005 2000 1990 Vietnam - Population, mn f = BMI forecast Source: World Bank, UN, BMI © Business Monitor International Ltd Page 30 Vietnam Autos Report Q2 2016 Vietnam Population Pyramid 2015 (LHS) & 2015 Versus 2050 (RHS) Source: World Bank, UN, BMI Table: Population Headline Indicators (Vietnam 1990-2025) 1990 2000 2005 2010 2015f 2020f 2025f 68,209 80,285 84,203 88,357 93,447 98,156 102,092 na 1.1 0.9 1.0 1.1 0.9 0.7 Population, total, male, '000 33,583 39,551 41,469 43,626 46,224 48,590 50,510 Population, total, female, '000 34,625 40,734 42,734 44,730 47,223 49,566 51,581 Population ratio, male/female 0.97 0.97 0.97 0.98 0.98 0.98 0.98 Population, total, '000 Population, % y-o-y na = not available; f = BMI forecast Source: World Bank, UN, BMI Table: Key Population Ratios (Vietnam 1990-2025) Active population, total, '000 Active population, % of total population Dependent population, total, '000 Dependent ratio, % of total working age © Business Monitor International Ltd 1990 2000 2005 2010 2015f 2020f 2025f 38,808 49,712 55,795 61,655 65,572 67,775 69,459 56.9 61.9 66.3 69.8 70.2 69.0 68.0 29,401 30,573 28,408 26,702 27,875 30,381 32,633 75.8 61.5 50.9 43.3 42.5 44.8 47.0 Page 31 Vietnam Autos Report Q2 2016 Key Population Ratios (Vietnam 1990-2025) - Continued Youth population, total, '000 1990 2000 2005 2010 2015f 2020f 2025f 25,494 25,416 22,866 20,919 21,576 22,487 22,335 65.7 51.1 41.0 33.9 32.9 33.2 32.2 3,907 5,157 5,542 5,783 6,298 7,893 10,298 10.1 10.4 9.9 9.4 9.6 11.6 14.8 Youth population, % of total working age Pensionable population, '000 Pensionable population, % of total working age f = BMI forecast Source: World Bank, UN, BMI Table: Urban/Rural Population & Life Expectancy (Vietnam 1990-2025) 1990 Urban population, '000 2020f 2025f 13,815.9 19,568.8 22,971.6 26,853.7 31,391.9 36,120.7 40,780.9 Urban population, % of total Rural population, '000 2000 20.3 24.4 2005 27.3 2010 30.4 2015f 33.6 36.8 39.9 54,393.7 60,716.8 61,232.2 61,504.1 62,055.7 62,036.0 61,311.7 Rural population, % of total 79.7 75.6 72.7 69.6 66.4 63.2 60.1 Life expectancy at birth, male, years 66.0 68.4 69.3 70.2 71.2 72.1 73.1 Life expectancy at birth, female, years 75.1 78.1 79.2 80.0 80.6 81.1 81.6 Life expectancy at birth, average, years 70.5 73.3 74.3 75.1 75.9 76.7 77.4 f = BMI forecast Source: World Bank, UN, BMI Table: Population By Age Group (Vietnam 1990-2025) 1990 2000 2005 2010 2015f 2020f 2025f Population, 0-4 yrs, total, '000 9,211 7,244 6,751 7,265 7,740 7,601 7,108 Population, 5-9 yrs, total, '000 8,512 9,119 7,130 6,648 7,221 7,698 7,562 Population, 10-14 yrs, total, '000 7,769 9,052 8,983 7,005 6,614 7,187 7,664 Population, 15-19 yrs, total, '000 7,277 8,401 8,941 8,877 6,972 6,583 7,156 Population, 20-24 yrs, total, '000 6,570 7,610 8,242 8,764 8,803 6,908 6,522 Population, 25-29 yrs, total, '000 5,938 7,019 7,408 8,022 8,664 8,705 6,823 Population, 30-34 yrs, total, '000 5,079 6,300 6,863 7,223 7,932 8,572 8,616 Population, 35-39 yrs, total, '000 3,842 5,746 6,190 6,718 7,146 7,850 8,488 Population, 40-44 yrs, total, '000 2,447 4,938 5,663 6,096 6,640 7,065 7,766 Population, 45-49 yrs, total, '000 2,003 3,710 4,880 5,592 6,004 6,543 6,968 © Business Monitor International Ltd Page 32 Vietnam Autos Report Q2 2016 Population By Age Group (Vietnam 1990-2025) - Continued 1990 2000 2005 2010 2015f 2020f 2025f Population, 50-54 yrs, total, '000 1,956 2,331 3,658 4,801 5,467 5,875 6,410 Population, 55-59 yrs, total, '000 2,033 1,873 2,223 3,501 4,625 5,275 5,681 Population, 60-64 yrs, total, '000 1,658 1,779 1,723 2,055 3,314 4,392 5,023 Population, 65-69 yrs, total, '000 1,402 1,759 1,599 1,551 1,894 3,066 4,081 Population, 70-74 yrs, total, '000 1,021 1,313 1,520 1,390 1,369 1,682 2,739 Population, 75-79 yrs, total, '000 747 977 1,073 1,254 1,158 1,150 1,424 Population, 80-84 yrs, total, '000 426 593 726 809 957 893 895 Population, 85-89 yrs, total, '000 221 334 382 479 541 649 613 Population, 90-94 yrs, total, '000 70 131 176 208 265 305 370 Population, 95-99 yrs, total, '000 15 40 52 73 88 114 133 Population, 100+ yrs, total, '000 11 16 23 30 39 f = BMI forecast Source: World Bank, UN, BMI Table: Population By Age Group % (Vietnam 1990-2025) 1990 2000 2005 2010 2015f 2020f 2025f Population, 0-4 yrs, % total 13.50 9.02 8.02 8.22 8.28 7.74 6.96 Population, 5-9 yrs, % total 12.48 11.36 8.47 7.52 7.73 7.84 7.41 Population, 10-14 yrs, % total 11.39 11.28 10.67 7.93 7.08 7.32 7.51 Population, 15-19 yrs, % total 10.67 10.46 10.62 10.05 7.46 6.71 7.01 Population, 20-24 yrs, % total 9.63 9.48 9.79 9.92 9.42 7.04 6.39 Population, 25-29 yrs, % total 8.71 8.74 8.80 9.08 9.27 8.87 6.68 Population, 30-34 yrs, % total 7.45 7.85 8.15 8.18 8.49 8.73 8.44 Population, 35-39 yrs, % total 5.63 7.16 7.35 7.60 7.65 8.00 8.31 Population, 40-44 yrs, % total 3.59 6.15 6.73 6.90 7.11 7.20 7.61 Population, 45-49 yrs, % total 2.94 4.62 5.80 6.33 6.43 6.67 6.83 Population, 50-54 yrs, % total 2.87 2.90 4.34 5.43 5.85 5.99 6.28 Population, 55-59 yrs, % total 2.98 2.33 2.64 3.96 4.95 5.37 5.57 Population, 60-64 yrs, % total 2.43 2.22 2.05 2.33 3.55 4.47 4.92 Population, 65-69 yrs, % total 2.06 2.19 1.90 1.76 2.03 3.12 4.00 Population, 70-74 yrs, % total 1.50 1.64 1.81 1.57 1.47 1.71 2.68 Population, 75-79 yrs, % total 1.10 1.22 1.27 1.42 1.24 1.17 1.40 Population, 80-84 yrs, % total 0.63 0.74 0.86 0.92 1.02 0.91 0.88 © Business Monitor International Ltd Page 33 Vietnam Autos Report Q2 2016 Population By Age Group % (Vietnam 1990-2025) - Continued 1990 2000 2005 2010 2015f 2020f 2025f Population, 85-89 yrs, % total 0.33 0.42 0.45 0.54 0.58 0.66 0.60 Population, 90-94 yrs, % total 0.10 0.16 0.21 0.24 0.28 0.31 0.36 Population, 95-99 yrs, % total 0.02 0.05 0.06 0.08 0.09 0.12 0.13 Population, 100+ yrs, % total 0.00 0.01 0.01 0.02 0.03 0.03 0.04 f = BMI forecast Source: World Bank, UN, BMI © Business Monitor International Ltd Page 34 Vietnam Autos Report Q2 2016 Methodology Industry Forecasts BMI's industry forecasts are generated using the best-practice techniques of time-series modelling and causal/econometric modelling The precise form of model we use varies from industry to industry, in each case being determined, as per standard practice, by the prevailing features of the industry data being examined Common to our analysis of every industry is the use of vector autoregressions Vector autoregressions allow us to forecast a variable using more than the variable's own history as explanatory information For example, when forecasting oil prices, we can include information about oil consumption, supply and capacity When forecasting for some of our industry sub-component variables, however, using a variable's own history is often the most desirable method of analysis Such single-variable analysis is called univariate modelling We use the most common and versatile form of univariate models: the autoregressive moving average model (ARMA) In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality is poor In such cases, we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting BMI mainly uses OLS estimators and, in order to avoid relying on subjective views and encourage the use of objective views, we use a 'general-to-specific' method BMI mainly uses a linear model, but simple nonlinear models, such as the log-linear model, are used when necessary During periods of 'industry shock', for example poor weather conditions impeding agricultural output, dummy variables are used to determine the level of impact Effective forecasting depends on appropriately selected regression models BMI selects the best model according to various different criteria and tests, including but not exclusive to: ■ R2 tests explanatory power; adjusted R2 takes degree of freedom into account; ■ Testing the directional movement and magnitude of coefficients; ■ Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value); ■ All results are assessed to alleviate issues related to auto-correlation and multi-collinearity © Business Monitor International Ltd Page 35 Vietnam Autos Report Q2 2016 BMI uses the selected best model to perform forecasting Human intervention plays a necessary and desirable role in all of BMI's industry forecasting Experience, expertise and knowledge of industry data and trends ensure that analysts spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not Sector-Specific Methodology A number of principal criteria drive our extrapolations and forecasts for each autos variable ■ Production And Sales At a general level, we approach our forecasting from both a micro and a macro perspective, assessing the expansion plans of relevant multinationals/indigenous firms, while also taking account of the prevailing economic outlook In this latter respect, our projections for macro variables such as industrial output, private consumption, government investment, monetary policy and GDP growth play a key role Figures for production are derived from a generic source (thereby ensuring maximum comparability between country data-sets), and include all vehicles with four wheels or more For sales, we rely on data from government agencies and national automobile associations Unless otherwise stated, sales numbers include domestically produced and imported vehicles, but not exports The sector's contribution to GDP is projected by taking the US dollar production value as a proportion of nominal GDP, using our own macroeconomic and demographic forecasts ■ Auto Imports And Exports These variables are mainly calculated at the micro level, using individual company reports Changes in government policy, particularly with regard to tariffs and quotas, also have a significant bearing Sources Aside from government departments and official company reports, we rely on the International Organization of Motor Vehicle Manufacturers (OICA), other established think tanks, institutes, and international and national news agencies © Business Monitor International Ltd Page 36 Vietnam Autos Report Q2 2016 Risk/Reward Index Methodology BMI's Risk/Reward Index (RRI) provides a comparative regional ranking system evaluating the ease of doing business and the industry-specific opportunities and limitations for potential investors in a given market The RRI system divides into two distinct areas Rewards Evaluation of sector's size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development This is further broken down into two sub categories: ■ Industry Rewards This is an industry-specific category taking into account current industry size and growth forecasts, the openness of market to new entrants and foreign investors, to provide an overall score for potential returns for investors ■ Country Rewards This is a country-specific category, and the score factors in favourable political and economic conditions for the industry Risks Evaluation of industry-specific dangers and those emanating from a state's political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period This is further broken down into two sub categories: ■ Industry Risks This is an industry-specific category whose score covers potential operational risks to investors, regulatory issues inhibiting the industry and the relative maturity of a market ■ Country Risks This is a country-specific category in which political and economic instability, unfavourable legislation and a poor overall business environment are evaluated to provide an overall score We take a weighted average, combining industry and country risks, or industry and country rewards These two results provide an overall RRI, which is used to create our regional ranking system for the risks and rewards of involvement in the autos industry in a particular country For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall RRI a weighted average of the total score As most of the countries and territories evaluated are considered by BMI to be 'emerging markets', our index is revised on a quarterly basis This ensures that the score draws on the latest information and data across our broad range of sources, and the expertise of our analysts © Business Monitor International Ltd Page 37 Vietnam Autos Report Q2 2016 In constructing this index, the indicators in the table below have been used Almost all indicators are objectively based Given the number of indicators/datasets used, it would be inappropriate to give all subcomponents equal weight The weighting given is described in the table Table: Automotive Risk/Reward Index Indicators And Weighting Of Indicators Weighting, % Rewards 70, of which Industry Rewards 65, of which Vehicle ownership, % of population 10 Total vehicle stock, mn 10 Total production 10 Production growth, five-year forecast average 10 Total vehicle sales 10 Sales growth, five-year forecast average 10 Country Rewards 35, of which Urban/rural split 10 Rigidity of employment 10 Labour costs 10 GDP per capita, USD 10 Risks 30, of which Industry Risks 50, of which Regulatory environment 10 Competitive landscape 10 Country Risks 50, of which Corruption 10 Bureaucracy 10 Market orientation - openness 10 Legal framework 10 Long-term monetary risks 10 Long-term external risks 10 Long-term financial risks 10 Long-term policy continuity 10 Source: BMI © Business Monitor International Ltd Page 38 [...]... and high dependence on imported components © Business Monitor International Ltd Page 16 Vietnam Autos Report Q2 2016 Strong Outlook Hides Long-Term Weakness Vietnam - Vehicle Production, Units 100,000 20 75,000 15 50,000 10 25,000 5 0 0 2013 2014 2015f 2016f 2017f 2018f 2019f Vietnam - Vehicle production, units (LHS) Vietnam - Vehicle production, units, % y-o-y (RHS) f = BMI forecast Source: OICA, BMI... facilities include: Ford, GM Vietnam, Hino, Isuzu, Toyota, Vinamotor and Vinastar © Business Monitor International Ltd Page 14 Vietnam Autos Report Q2 2016 Growing FDI A Boon For Auto Production Vietnam - Domestic Auto Production, Units (LHS); % chg y-o-y (RHS) Source: VAMA, BMI New Production Investments Will Face Old Problems In line with this growing production and booming demand, Vietnam has seen a flurry... sales growth over the near term © Business Monitor International Ltd Page 10 Vietnam Autos Report Q2 2016 Industry Forecast Table: Autos Total Market - Historical Data And Forecasts (Vietnam 2014-2020) Vehicle production, units Vehicle production, units, % y-o-y Vehicle sales, units Vehicle sales, units, % y-o-y 2014 2015e 2016f 2017f 2018f 2019f 2020f 41,500 48,375 56,541 63,214 70,198 78,013 86,768... within this segment over 2016/ 17 © Business Monitor International Ltd Page 19 Vietnam Autos Report Q2 2016 Commercial Vehicles Table: Commercial Vehicle Market - Historical Data And Forecasts (Vietnam 2014-2020) 2014 Commercial vehicle sales, units Commercial vehicle sales, units, % y-o-y Commercial vehicle production, units Commercial vehicles production, units, % y-o-y 2015e 2016f 2017f 2018f 2019f... the taxi market and began assembling taxi cabs in 2014 - the Chevrolet Spark Taxi - specifically designed for Vietnam' s city streets © Business Monitor International Ltd Page 25 Vietnam Autos Report Q2 2016 Mercedes-Benz Vietnam Latest Developments: ■ ■ ■ ■ ■ ■ Company Overview Mercedes-Benz Vietnam has a diversified presence over new and used car sales, production, servicing and auto parts, as well... 2045f 2040f 2035f 2030f 2025f 2020f 2015f 2010 2005 2000 1990 0 Vietnam - Population, mn f = BMI forecast Source: World Bank, UN, BMI © Business Monitor International Ltd Page 30 Vietnam Autos Report Q2 2016 Vietnam Population Pyramid 2015 (LHS) & 2015 Versus 2050 (RHS) Source: World Bank, UN, BMI Table: Population Headline Indicators (Vietnam 1990-2025) 1990 2000 2005 2010 2015f 2020f 2025f 68,209.. .Vietnam Autos Report Q2 2016 Vietnam Autos Industry SWOT - Continued ■ premium and small car segments The annual reduction of tariffs on CBU imports from other ASEAN nations in the next few years will give existing automakers... renewal by small to medium-sized Vietnamese businesses ■ Local producer Thaco remains the dominant player within the LCV segment ■ Other leading brands selling in the Vietnamese LCV market are Ford, Vinamotor and Suzuki • Within the heavy commercial vehicle (HCV) segment, Thaco and Hino are the market leaders © Business Monitor International Ltd Page 20 Vietnam Autos Report Q2 2016 Sales Race Ahead Of Output... y-o-y 80 60 40 20 0 2014 2015e 2016f 2017f 2018f 2019f 2020f Commercial vehicle sales, units, % y-o-y Commercial vehicles production, units, % y-o-y f = BMI forecast Source: National sources/BMI © Business Monitor International Ltd Page 21 Vietnam Autos Report Q2 2016 Table: Key Players: Selected VAMA Members - Commercial Vehicle Sales For 10M14 Brand Total Sales Mekong 168 GM Vietnam 736 Vinastar 701 Suzuki... its legal score Industry policy is also skewed towards incumbent producers, of which there are very few © Business Monitor International Ltd Page 24 Vietnam Autos Report Q2 2016 Company Profile GM Vietnam Latest Developments: ■ ■ ■ ■ ■ Company Overview GM Vietnam has a diversified presence over new and used car sales, production, servicing and auto parts, as well as over 20 years' experience of working ... Business Monitor International Ltd Page Vietnam Autos Report Q2 2016 SWOT Vietnam Autos Industry SWOT Strengths ■ Low rates of vehicle ownership, together with Vietnam' s large population, provide... 16 Vietnam Autos Report Q2 2016 Strong Outlook Hides Long-Term Weakness Vietnam - Vehicle Production, Units 100,000 20 75,000 15 50,000 10 25,000 0 2013 2014 2015f 2016f 2017f 2018f 2019f Vietnam. .. for Vietnam' s city streets © Business Monitor International Ltd Page 25 Vietnam Autos Report Q2 2016 Mercedes-Benz Vietnam Latest Developments: ■ ■ ■ ■ ■ ■ Company Overview Mercedes-Benz Vietnam