HANOI • Vietnam is getting into the car business with its own brand. Real-estate conglomerate Vingroup's auto unit, VinFast, marked the roll-out of its first vehicles from its assembly line yesterday, 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, which was 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 next Monday, wants to be the first Vietnamese company to succeed at challenging foreign competitors such as Toyota, Ford and Honda 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 roll-out, a hatchback named Fadil, is initially priced at 394.5 million dong (S$23,100).
Vingroup said in 2017 it planned to invest up to US$3.5 billion (S$4.8 billion) in its auto business.
The company will also produce a sedan, sport utility vehicle (SUV) and electric motorcycles.
The new automaker, though, faces challenges in Vietnam's aspirational culture. "Product quality is a concern" among consumers, said senior analyst Truc Pham from ACB Securities JSC in Ho Chi Minh City.
"Vietnamese people favour 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 pre-orders a year ago.
Vietnamese purchased 119,497 new vehicles in the first five months of the year, an 18 per cent jump from the year-earlier period, according to the Vietnam Automobile Manufacturers' Association.
VinFast's vehicles are not 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, designed by Italian design house Pininfarina and have components engineered by Magna Steyr. Mr Jim Deluca, former vice-president of global manufacturing for General Motors, was hired as VinFast's chief executive.
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 per cent since 2000 - boosting annual incomes to almost US$2,600 from about US$400.