General Motors is to transfer its Vietnam operation to local rival VinFast in a strategic partnership that will see the Vietnamese group become the country’s exclusive distributor of Chevrolet cars.
According to a report by Financial Times, the car-making arm of Vingroup, Vietnam’s biggest conglomerate, said on Thursday it would implement “a significant investment program” to launch next year an all-new, global small car licensed from GM and manufactured and sold under its own brand.
The Vietnamese company, which is already building a factory in the north of the south-east Asian country that will make mopeds and passenger cars, said the US group would become its preferred automotive technology partner, and that this would open “potential pathways for future product-sharing and technology transfer”.
The two sides, which did not reveal how much they would invest in the partnership, said GM’s operation in Vietnam, including its Hanoi plant, dealership network, and employee base, would be transferred to VinFast by the end of this year.
Jim DeLuca, VinFast chief executive, was a GM head of production before going to work for the fledgling Vietnamese brand.
Vietnam, with a population of 96m and a growing number of people graduating from two-wheeled transport into cars, has taken steps recently to protect its local car market, using non-tariff barriers to impede imports from Thailand — home to the region’s largest car industry — and other countries.
In response, some foreign carmakers have been looking for opportunities to produce or assemble cars locally. Japanese carmaker Mazda in March opened a factory in central Vietnam in partnership with Thaco, the country’s biggest carmaker.
For Vingroup, founded and chaired by Pham Nhat Vuong, Vietnam’s richest man, the deal with GM will mark a deepening commitment by the sprawling company to the promising but risky business of making cars. Vingroup styles itself as a “cradle to grave” provider of goods and services to Vietnamese consumers, with businesses in retail, real estate, education, and other areas. This month it said it had established a unit that will make and sell smartphones.
GM’s Hanoi plant made about 7,600 vehicles in 2017 but has the capacity to produce 30,000 a year, according to LMC Automotive.
“VinFast can use the GM facility to produce their car, and access to GM technology could help them lower research and development costs — one of the largest costs in the automotive industry,” said Titikorn Lertsirirungsun, manager of LMC Automotive in Bangkok. “This partnership means VinFast will not have to start from scratch manufacturing, a dealer network, and a supply chain.”
VinFast is investing $1.5bn in the first phase of a program to make cars and mopeds at a greenfield factory on Cat Hai island near Haiphong in north-east Vietnam. The car brand has bought in technology and services from Germany’s BMW, Italian design house Pininfarina, and supplier groups Bosch and Siemens, among others, to produce two planned car models.
Stephen McKeever, head of sales with Ho Chi Minh City Securities, wrote in a recent note on VinGroup that it “ascribed zero value” to the VinFast car project, adding that this was “arguably generous” because of the likely scale of operating losses that would need to be incurred before it achieved the scale needed to reach profitability.
By John Reed | Twitter: @JohnReedwrites