What do you get when you mix a British soccer star, a French auto show, and a Vietnamese conglomerate? It sounds like a setup for a joke, but the answer is VinFast, the first luxury car built in Vietnam.
The new car debuted at a Paris exhibition in October with some public relations help from soccer superstar David Beckham.
The unveiling signaled a turning point not just for Vietnam’s car manufacturing industry, but also for the Communist country’s transportation landscape.
Although it has close to one motorbike for every two people, Vietnam is quickly ditching its iconic two-wheel transportation for cars.
That has left a question on some people's minds: Is the country ready for “carmageddon”?
Car ownership is expected to climb drastically in the coming years, but from the narrow alleys to the lack of sufficient bridges, Vietnam’s creaking infrastructure was not built for millions of four-wheel vehicles. The automobile also does not bode well for pollution or congestion in a country of almost 100 million people. Vietnam fears it will be among the places worst hit by climate change.
Still, the cars are coming. U.S. auto giant Ford, for example, saw a new record in monthly turnover in November, when it sold 3,466 vehicles to Vietnamese shoppers. That was a 44 percent jump compared with sales in the same period in 2017. The automaker also recently introduced three more makes to the domestic market.
“Things are really coming together for us to close out the year, including a series of successful new vehicle launches,” said Pham Van Dung, who is managing director of Ford Vietnam.
The reasons for the growth overall are higher annual incomes, as well as lower taxes. In particular the Vietnamese government dropped import taxes to zero in January as part of an agreement among the Association of Southeast Asian Nations. That fed predictions that cars would flood into Vietnam, since there are no tariffs if the cars are produced in Thailand, Indonesia, or elsewhere in the region. Without the deal, tariffs could double the final cost of an automobile. Data from October show car imports nearly doubled this year compared to last year.
That growth raises the chances that Vietnam’s biggest cities, Hanoi and Ho Chi Minh City, are fated to be another Bangkok, Jakarta, or Manila in the near future. Those Southeast Asian nations are far more gridlocked than Vietnam’s megacities, even though they also number about 10 million residents, That's because they depend more on cars than mopeds, unlike Vietnam.
Public transit and ride-sharing are options to stave off carmageddon. Uber, Lyft, and Grab made ride-hailing apps that they say can decrease car ownership -- and thus, traffic -- by getting more people to carpool.
“Grab plans to work with partners to create a more efficient transport network that will ease traffic congestion in Southeast Asia’s megacities [and] make mobility accessible for all,” the Malaysia-based app-maker said in a statement.
If the Vietnamese are not going to drive, they need alternatives. People do take the bus, but the public fleet is aging, and drivers often skip stations or roll to crawl rather than stop completely to let riders on and off. A subway system is planned to launch in Hanoi in 2019, but its counterpart in Ho Chi Minh City has faced repeated and potentially permanent delays.
The influx of cars has implications far beyond the auto sector. Developer CBRE said in a report this month that it has left a sizable imprint on the local property market.
“From the real estate perspective, the most important aspect for market shift and macroeconomic conditions is the increased demand and expansion of industrial production [of cars],” the report said. “In fact, there have been major industrial and commercial lease deals related to the automobile sector over the past three years, with anticipated demand for lease extensions in future periods.”
That industrial production underlies a key quandary for policymakers. On the one hand, they want Vietnam to develop its own robust car manufacturing industry, to contribute to the economy in the vein of South Korea or Japan. On the other hand, they worry about exacerbating climate change, which could ravage Vietnam’s long coastline, drive salty water into the deltas and farmlands, and flood cities. The rise of cars, with all their greenhouse-gas-emitting tailpipes, certainly won’t help the tropical country in its battle with climate change.