Motorcycle makers battle it out in Vietnam

Southeast Asia's underdeveloped transport network ensures vital bike market has plenty of room to grow

by Hiroko Nakata

HANOI — Red roses, field flowers, baskets of vegetables, slaughtered hogs. In Vietnam, farmers bring anything that can be loaded onto a motorcycle to market in the morning. In early evenings, bikers jam the streets as they return home.

The demand for motorcycles in Vietnam is extremely high due to a dearth of public transport and low income levels that put automobiles out of reach for many.

With 3 million motorbikes, Vietnam is the world’s fourth-largest market, behind China, India and Indonesia. Because the country is one of the few emerging economies yet to embrace the automobile, Japanese motorcycle manufacturers are major players.

Honda Motor Co., at 40 percent, holds the top share in the 3 million motorbike market, followed by Yamaha Motor Co.’s 20 percent. Because of Honda’s long domination of the Asian market with its popular Cub, people regard any motorbike as a “Honda,” regardless of manufacturer.

“Motorcycles and mobile phones are the most important tools to live in Vietnam,” said Nguyen Duc Cong, a guide at Japanese travel agent JTB Corp.’s Hanoi office.

“In Vietnam, we ride bikes when we go shopping, go to school and go to work,” Cong said.

Fathers buy a motorbike for their sons and daughters when they start working. They couldn’t go to work without one because there are no subways, he said. There are buses, but only people who commute for a long way or cannot buy motorcycles take a bus, he added.

“There is no country like Vietnam, where motorcycles are so deeply rooted in people’s lives,” said Tetsuya Kawahara, a senior manager for motorcycle sales at Honda Vietnam Co.

Kawahara said the Vietnam market has potential to grow, given data that one in every four Vietnamese owns a motorcycle — low compared with other Asian economies that have experienced rapid growth.

At their peak, for example, one in every 2.5 people had a motorbike in Taiwan, while one in every three had one in Thailand.

“I expect the (motorcycle) market to grow for four or five more years,” Kawahara said.

To support demand, Honda opened a new plant in a Hanoi suburb Aug. 29, boosting production capacity to 1.5 million bikes from 1 million. Yamaha will launch a new plant in Hanoi later this month to raise its capacity to 700,000 bikes from 470,000.

But there is a hurdle the Japanese makers have to overcome — an influx of illegal Chinese spinoffs with logos similar to Japanese brands, including “Hunda,” “Hongda” and “Yamaza.”

The locally assembled bikes with Chinese components, costing a third of Japanese bikes, started to increase in 2000 and occupied about an 80 percent share of the market the following year.

But after Honda debuted its low-priced Wave alpha in 2002 and the Vietnamese government introduced tighter regulations, Japanese makers have gradually regained their footing, experts said.

Hanoi has reported 21,497 illegal copies of Honda bikes since 2001. But Honda has not sued the makers of the fake components, partly because Vietnam lacks a judicial system geared to handle patent infringement cases, said Atsushi Kikuchi, chief financial officer at Honda Vietnam Co.

The company is currently in wait-and-see mode, because the government is scheduled to set up a patent court by 2010, he said.

Meanwhile, Honda plans to have all of its local dealers sport the same exterior design and their staff to wear the same uniforms to differentiate its bikes from the bogus copies on sale at other outlets.

The battle between Japanese makers and the Chinese counterfeiters may drag on because it is expected to take a long time for automobiles to overrun the motorcycle market.

“Unless the country’s income structure changes, the number of car buyers will not increase,” Honda’s Kawahara said.

Experts say a country must at least top the $1,000 threshold for per capital gross domestic product before ordinary people start buying cars in large numbers. That means people in Vietnam, whose GDP is about $800 per capita, don’t have enough income to buy a car, he said.

Cong, the JTB guide, earns the equivalent of ¥70,000 a month and owns a ¥160,000 Yamaha motorbike. “People earn about ¥60,000 to ¥70,000 a month in big cities,” he said. “It is nothing special to ride a ¥150,000 to ¥200,000 bike.”

But when it comes to a four-wheel vehicle, the price could be nearly 60 times his monthly income, mostly because imported cars face a huge tariff, he said.

Cities also lack adequate parking space, said Koji Sato, a senior economist on Asia at Mizuho Research Institute Ltd.

“It may take a long time for the country to see motorization. Since there is little space for parking, the country would need to have a grand city planning project,” Sato said.