VW making inroads into Asean via Vietnam

Europe’s biggest carmaker, Volkswagen AG (VW), is eyeing the Asean market.

It had set its sights on South-East Asia but past efforts were not successful as it failed to establish a strategic partnership with Malaysian carmaker, Proton Holdings Bhd.

After several failed rounds of negotiations with Proton, VW recently signed a deal with DRB-HICOM Bhd and is now making inroads into the Asean region through Vietnam.

VW has been closely studying market conditions in the Asean region, whose 500 million consumers offer a large pool of buyers, eventhough they would not be able to pay the high sale prices of VW cars that were popular in Europe.

The car models conceived for the Asean market would have to be different and in the lower price category to make them attractive for buyers.

What has spurred VW to look into the Asean region was the dominating presence of Japanese carmaker Toyota, which enjoys 33 percent market share compared with VW’s meagre 0.2 percent-0.3 percent in South-East Asia.

VW wants to penetrate the Asean region by offering low-cost models. This was also a reason why VW recently signed a partnership agreement with DRB-HICOM, which would complement its efforts to penetrate the Asean region where Toyota has been dominant for decades, Harold Sewitz, a German management consultant with deep knowledge of the Asia-Pacific automotive industry told Bernama.

VW sees Vietnam as a production site that is attractive not only because of the access it provides to the large Asean market, but also for its low labour and production costs.

VW will probably produce its pick-up Amarok vehicle to compete against Toyota in the Asean region. VW currently manufactures this model in South America and some experts argue that the Amarok could also be suited for the Asean market.

According to unconfirmed reports, VW is toying with a production volume of 200,000 units in the long run. VWs appetite for new Asian markets follows its impressive growth in China.

One of the driving factors behind VW’s plan to establish a production site within Asean was to circumvent the high import duties on foreign-made cars, a hurdle which VW could not overcome if it were to ship cars from its China production.

VW does carry out some partial assembly in Indonesia of the Touran model in partnership with a local company.