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$17,000 Hatchback From Vietnam Rolls Out to Take on Ford and Toyota

June 14, 2019
Real-estate conglomerate Vingroup JSC’s auto unit VinFast marked the rollout of its first vehicles from its assembly line on Friday.

Vietnam is getting into the car business with its own brand.

Real-estate conglomerate Vingroup JSC’s auto unit VinFast marked the rollout of its first vehicles from its assembly line on Friday, embodying the aspirations of the fast-developing country’s government to build a modern manufacturing sector.

“This makes a great contribution to the national economy,” Vietnamese Prime Minister Nguyen Xuan Phuc said in a speech during a ceremony at VinFast’s complex of six automated factories constructed in 21 months in the northern port city of Haiphong. “It affirms the Communist Party’s policy that the private sector is a very important driver of the economy. I want VinFast to go to the regional and global markets.”

VinFast, which will start delivering cars to customers Monday, wants to be the first Vietnamese company to succeed at challenging foreign competitors such as Toyota Motor Corp., Ford Motor Co. and Honda Motor Co. in one of the world’s fastest-growing economies. Xuan Kien Automobile, known as Vinaxuki, failed to win over brand-conscious Vietnamese with its local car models before folding in 2015.

The first VinFast rollout, a hatchback named Fadil, is initially priced at 394.5 million dong ($16,900). Vingroup said in 2017 it planned to invest up to $3.5 billion in its auto business. The company will also produce a sedan, sport utility vehicle and electric motorbikes.

The new automaker, though, faces challenges in Vietnam’s aspirational culture.

“Product quality is a concern” among consumers, said Truc Pham, a senior analyst at ACB Securities JSC in Ho Chi Minh City. “Vietnamese people favor foreign brands for high-value products. It will take years for customers to accept a new local brand.”

VinFast plans to make 250,000 vehicles during a first stage of operations, with projected production increasing to 500,000 vehicles a year by 2025. Last year, the company said it expects to begin exports in mid-2020.

The company said it received 10,000 vehicle pre-orders a year ago. Vietnamese purchased 119,497 new vehicles in the first five months of the year, an 18% jump from the year-earlier period, according to the Vietnam Automobile Manufacturers’ Association.

The vehicles aren’t completely made in Vietnam. The Fadil uses the chassis of the Karl Rocks model by PSA Group’s Opel. The sedan and SUV are built on frames from BMW AG, designed by Italian design house Pininfarina and have components engineered by Magna Steyr. Jim Deluca, the former vice president of global manufacturing for General Motors Co., was hired as VinFast’s chief executive officer.

Vingroup embraced the government’s aspirations to see domestic manufacturers make high-value products for the nation’s growing middle class in an economy that has expanded at an average clip of 6.6% since 2000 -- boosting annual incomes to almost $2,600 from about $400.

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