Vindaco dissolves because small vehicle market too small

16:45' 14/06/2007 (GMT+7)

VietNamNet Bridge – Kimikazu Mitsuhashi, Director General of the dissolved automobile joint venture Vindaco, said that automobile manufacturers were facing big difficulties with current policies, poor infrastructure and small market. VAMA’s Vindaco joint venture dissolving Could you please tell me the reasons behind Vindaco’s dissolution? Kimikazu Mitsuhashi, Director General of Vindaco Japan's Daihatsu is well known for its small vehicles. When deciding to make investment in Vietnam several years ago, we hoped to dominate the market with less-than-one-tonne vans and the multipurpose vehicle (MPV) Terios. However, everything did not go the way we expected. The sales of small vehicles decreased sharply from 8,000 units in 2005 to 3,000 in 2006. With such a small market and the fierce competition among manufacturers, we know we cannot continue our business in Vietnam. Why have small vehicles sold slowly, while small vehicles prove to be more convenient compared to bigger vehicles? It is because of many reasons. First, small vehicles are bearing the same taxes as bigger vehicles so the production costs of big and small vehicles are equal, while customers all want lower prices for smaller vehicles. Second, most Vietnamese people consider a car a big asset and a kind of investment; therefore, they are always cautious when making decisions. The most important factor for Vietnamese buyers is reasonable price. The third weak point of small vehicles is that people can just use them to go to work and get around town, but they cannot use them to take their entire families on outings. Daihatsu is affiliated with Toyota. How would you comment about the information that Toyota has put pressure on Daihatsu to withdraw from Vietnam? It is true that Daihatsu and Toyota have many associate companies and cooperation centres, but they keep independent of each other. We do not receive any pressure from the outside; we make our decisions based on the market. Will Daihatsu stay in Vietnam after Vindaco dissolves? You could distribute imported cars, for example. We have not got any plans to stay in Vietnam, but we may consider this in the time to come. I think the market proves to have potential and Daihatsu will return as soon as it can. How will you deal with clients who have bought Vindaco’s cars, I mean post-sales services? I can assure you that all post-sale services will still be provided as previously, when Vindaco was operational. We have 16 authorised workshops nationwide, and our commitments on car maintenance will still be valid. Before dissolving, Daihatsu signed contracts with our workshops, requesting them to fulfill our commitments with clients until November 6. After the date, Daihatsu will assign a third manufacturer who will be responsible for caring for our products in Vietnam. Besides, Daihatsu will provide spare parts through distributors so that Vietnamese clients can get replacement accessories at any time. How will you deal with your staffs and the joint venture’s staffs after the dissolution? Vindaco now employs 117 staffs, including three foreigners. Most of them will still get a salary through the end of July though the joint venture will be dissolved in June. Moreover, we have other kinds of compensation. Regarding the joint venture’s assets, Vindaco’s management board has decided to give back the 6ha land plot in Soc Son district to the Hanoi Department for Natural Resources and the Environment. The movable assets, including the production line, workshop and office will be auctioned. What is your assessment about Vietnam’s automobile industry? With the current policies, which allow the import of used cars, brand new cars, and with such poor infrastructure and a small market, it will be very difficult for Vietnam’s automobile industry to develop, and assemblers are facing a lot of difficulties. (Source: VNE)