Ironically, the market slump has come just after motorbike manufacturers built more assembling factories to expand their business in Vietnam following a prosperous business period. This has forced them to rethink their production plans.
Masayuki Igarashi, General Director of Honda Vietnam, which is holding 60 percent of the market share, has said that while the productivity in the first five months of the year was equal to 104 percent of the same period of the last year, the sales have been going very slowly, thus leading to the high inventories.
The general director said he is considering cutting the output from July, while workers would stay off from works for some days. The third Honda’s Vietnam factory is being built in Ha Nam province which would be completed on schedule. However, he said that if the situation is still bad, the third factory would not be put into operation right after the construction is completed as previously planned, though Honda still would complete the construction and equipment installation.
Other big motorbike manufacturers are also facing big difficulties, which have forced them to launch big promotion programs to stimulate the demand. Piaggio Vietnam, for example, has launched the biggest ever sales promotion campaign applied to the buyers of Vespa and Fly i.e.
Some days ago, Piaggio Vietnam announced the price reductions for some models. The price reduction of 3 million dong has been announced for Vespa series, while the buyers of Piaggio Fly i.e would enjoy the 4 million dong reduction. Besides, the company has also promised to prop-up the ownership registration tax for the customers in Hanoi and HCM City.
The spokesman of Piaggio Vietnam said the market is experiencing the lowest sales season of the year. Meanwhile, the demand has decreased dramatically because of the economic downturn.
Yamaha, another Japanese motorbike manufacturer, has also promised the price reductions of 400,000-700,000 dong for its models, which is a part of an ongoing big sales promotion campaign. Prior to that, the manufacturer announced the single price discount of 888,000 dong for all the customers, who bought any PGM-FI model.
The situation proves to be even more difficult for 100 percent domestic owned manufacturers, who have been selling products at huge price discounts, but still cannot boost sales.
Sufat Vietnam, for example, which has the designed capacity of 10,000 products per annum, is now running at just 1/3 of the capacity, i.e. it now can churn out 3000 motorbikes a year, while it still has 7000 products left unsold.
Lishohaka, a one-time famous Vietnamese brand, is also running at a moderate level. It has stopped importing motorbike parts over the last three months, focusing on assembling motorbikes from the parts imported before.
VnExpress has quoted its sources as saying that one foreign invested motorbike assembling enterprise is offering to sell the factory because it cannot survive the current difficulties.
Not only foreign motorbike manufacturers have been on tenterhooks because of the weak demand, but Vietnamese motorbike part suppliers have also been worried stiff.
A lot of the suppliers have expanded their production scale, following the move by motorbike manufacturers to set up more factories to increase the productivity. They had to borrow money from commercial banks at high interest rates of up to 22 percent, believing that they would be able to pay debts just after one year, when the factories become operational, slated for the end of 2012, and need more parts and accessories.
However, as the demand has been weakening, the business plans of the manufacturers have been upset, motorbike parts would be unsold.
According to the Ministry of Industry and Trade, the automobile and motorbike industrial production index increased sharply by 138.7 percent in 2011 over 2010. However, the situation has turned round since late 2011 with increasingly high inventories and decreasingly low sales.
While the motorbike productivity in the first five months of the year increased by 1.7 percent compared with the same period of the last year, the sales have dropped by 3.9 percent.