1 BANKING ACADEMY INTERNATIONAL BUSINESS VINFAST''''S STRATEGY IN EXPORTING AUTOMOBILES TO THE USA 2 CONTENTS PREFACE 3 I COMPANY BACKGROUND 4 1 Introduction 4 2 Core values, mission, vision 4 3 Products[.]
BANKING ACADEMY INTERNATIONAL BUSINESS VINFAST'S STRATEGY IN EXPORTING AUTOMOBILES TO THE USA CONTENTS PREFACE I COMPANY BACKGROUND Introduction Core values, mission, vision Products II REASONS FOR FINDING NEW MARKET III PESTEL MODEL ANALYSIS Political factors Economic factors Social factors Technological factors Environmental factors Legal factors IV MODE OF ENTRY 10 CONCLUSION 11 REFERENCES 12 PREFACE In recent years, Vietnam's import and export have grown rapidly thanks to a series of policies that have been modified in order to facilitate enterprises’ business Typically, the Government requires ministries to get rid of overlapping regulations, licenses , from which businesses could save time and costs The increase in imports and exports helps Vietnam become a trade surplus country with a turnover of about billion USD It makes an important contribution to macroeconomic stability, exchange rate stability, and controls of inflation The top 10 exports of Vietnam, whose export turnover accounts for 73 percent of Vietnam's one, are electronic products, phones, textile, types of equipment, and devices… In 2018, Vietnam ranked 26th in the top exporting countries all around the world As a consequence, Vietnam is continuously in the group of 30 countries with the largest import and export value on the global scale Vietnam is betting car-making can be a ticket to a more prosperous economy, just as it was for the likes of Japan and South Korea VinFast, a unit of Vietnam's largest conglomerate VinGroup JSC VIC.HM, is set to become the country's first fully-fledged domestic car manufacturer when its first production models built under its badge hit the streets From a standing start, VinFast will have the capacity to produce 250,000 cars annually in the next five years or so, equivalent to 92 percent of all the cars sold in Vietnam last year, according to data collated by the Vietnam Automobile Manufacturers’ Association The EVFTA was approved by the European Parliament on February 12, 2020 According to this agreement, almost 100 percent of tariff and import turnover of goods between Vietnam and the EU will be eliminated immediately or according to the 9-10 year schedule Accordingly, we make a report on VinFast’s strategy in exporting automobiles to the USA Vietnam and the US have huge potential to boost cooperation in trade and supply chains after COVID-19 is brought under control Besides, the USA has a large consumer market which opens up many opportunities for Vietnamese firms to increase exporting not only seafood, agriculture, and wood processing… but also the automobile industry I COMPANY BACKGROUND Introduction VinFast is a LLC private automotive startup manufacturer headquartered in Vietnam which opened in 2017, a member of the conglomerate organization VinGroup It is the first Vietnamese car brand attempting to hit global markets The company was founded in 2017 by VinGroup The company designed its models with the help of Pininfarina, BMW and Magna Steyr and participated in the 2018 Paris Motor Show VINFAST stands for Vietnam – Style – Safety – Innovation – Pioneer, and aspires to be the brand for Vietnamese cars VinGroup is a leading international automobile group with a vision to establish a modern, high tech brand in Vietnam Through the brand, VinGroup aims to promote the development of the country's industrial and manufacturing sectors Core values, mission, vision World-class quality: Bringing together the best of the world's car industry to create cars that meet international standards Mission: Mark the Vietnamese identity on the map of the global car manufacturing industry Vision: To become the leading car manufacturer in Southeast Asia - bringing together the best of the world's industry to create products worthy of international standards Products 3.1 Automobiles • LUX A2.0: The VinFast A2.0 is a mid-size sedan that's positioned in the D-segment segment Its refined appearance and innovative design make it stand out from the crowd • LUX SA2.0: The concept of the SA2.0 is based on the 5th generation BMW X5 • President: The VinFast President, which was unveiled in September 2020, is a limited-edition version of the VinFast LUX SA2.0 VinFast Lux V8 President is the latest model of the VinFast cars It is equipped with all the latest features and technology • Fadil: VinFast Fadil, which was presented to the public later, is a very popular small A-class car in the segment 3.2 Electric automobiles • VF e34: The battery is a 42-kwh unit with a claimed range of 300km The frontwheel drive VF e34 is powered by a 110kW/242Nm electric motor • VF32: Safety standards: NHTSA 5, Euro NCAP • VF33: The battery is a 106-kilowatt-hour unit that Vinfast estimates will deliver over 300 miles of range Safety standards: NHTSA 5, Euro NCAP II REASONS FOR FINDING NEW MARKET Entering a new market is a both risky and profitable move, but sometimes necessary to grow and expand VinFast sold 29,485 cars last year in Vietnam, an increase from 2019 when they started production, but far fewer than its production capacity of 250,000 vehicles a year, according to VinGroup The company needs to open new markets to make use of that spare capacity as soon as possible and the US is one of the most potential markets for VinFast There are numerous reasons why VinFast should consider the US as its new market to export automobiles: • The domestic market is just small Only about 275,000 cars are sold a year, compared to the US market of around 15m in a year, and as high as 17.6m in 2016 Vietnamese cars have faced fierce competition against foreign cars because the cost of Vietnamese cars is high compared to imported cars, from which it is very difficult for them assemblers to compete While competing by brand is even more difficult, because the general psychology of consumers still believes more Japanese and Korean car models than domestic cars It is not only a function of a small market For VinFast, exporting is one of the ideal ways to have higher profit in foreign market • Building a car plant is super expensive There are many fixed costs and the only way to bear those fixed costs is to have a lot of volume • Reduce the reliance on the domestic market • Extend and broaden VinFast’s customer base and appeal to different customer segments the USA is the world’s 3rd most populated country with a total population of 328 million people by the end of 2020 - a potential consumer market • Build new skills and competencies The competitive structure of the US market is really static There are 22 players, with the newest being the Koreans, and they came in the 1980s The only two new entrants that have done well are smart cars and Tesla Both of which brought something new to the market: tiny cars and EVs And only Tesla has been successful Even with the skepticism around its guidance and its new cybertruck, it has reached a 1% share, above Volvo, Mitsubishi, Porsche and many others that have been competing for much longer • Achieve long-term vision In addition to electric cars, VinFast aims to export cars with internal combustion engines and turn Vietnam into a regional auto producer Its parent company, VinGroup, operates in an eclectic range of sectors including real estate, tourism, and health care, but has switched its focus in recent years to high-value technology such as automobiles and smartphones There are main reasons why VinFast needs to find other markets from Vietnam It makes more sense for the company to start competing in markets closer geographically III PESTEL MODEL ANALYSIS Political factors Laws and regulations have affected the manufacture of cars since its outburst Moreover, this has always made car manufacturers take into consideration the environmental issues during their car manufacture In the USA, new schemes were introduced in the automobile industry and these regulations led to increased production of cars with high mileage There are extreme foreign policies adopted by the US in order to protect its local automobile company – CMC, which is just recovering from its worst economic recession Similarly, other regulations that govern the North American market exist, and these include the provisions of NAFTA trade agreements NAFTA liberalizes trade operations between the USA, Mexico and Canada in addition to making it easier for foreign investments are certain trade barriers Economic factors The world economy has many fluctuations, there is a general rise in exchange rates in addition to unstable interest rates in the major markets of developed economies The US citizens have high disposable income compared to other economies, especially those of developing countries In addition, there is an increasing amount of disposable income and the majority of the workforce in the country is very skilled The availability of skilled workforce provides a mechanism in which the company can get workers for its product and the amount of disposable income makes US become market for VinFast However, there remain major challenges regarding globalization and international economic uncertainties that makes US most vulnerable to economic recession Social factors The socio-cultural analysis of the USA reveals a greater challenge for VinFast in this market The country is a developed nation and the population growth rate is flat Most of the cars seen on the roads are for couples who use them to commute to work The population of the USA is sensitive to environmental impact and the safety and it is for these reasons that such population is keen on their choice of vehicles, (Gordon et al., 2010) The country’s policies regarding pollution are so expansive It involves lower insurance fees, free parking and tax incentives on vehicle owners who possess environment-friendly vehicles One other major aspect that determines car ownership in US is the car efficiency Many of the US citizens are sensitive to cars, which consume a lot of fuel There is rising global fuel prices and this has attracted more attention to fuel-efficient cars since this will always allow its operators to make more savings VinFast, therefore, faces a number of challenges in order to meet the demand of its customers in the US market Technological factors The rapidly changing technology and presence of fierce competition means that in order to satisfy current market needs, there is a need to adopt the latest technology in the market In the US, the citizens are conscious of new developments in technology Modern car manufacturers especially CMC and Toyota Japan are embracing new technologies in their car manufacture and this means that VinFast has to follow suit in order to satisfy and be able to compete in the technology sensitive US market USA forms a great technological hub and many studies and research related to automobiles and other electronics means that the citizens are well informed of the latest technological advancements Environmental factors World automobile manufacturers are looking at a variety of ways in which adopt green technologies However, the diversity of regulations within different markets dictates the type of strategy to adopt in a specific market The energy and independence security act of 2007 regulates the standards of the environment in the automotive industry in the North American market This act has increased the corporate average fuel economy on the US market from 27.5 mpg to 35 mpg concerning its model year for 2020 by OEM’s A good analysis of the external environment shows great potential for car manufacturers if they adopt good strategies VinFast is the car manufacturer who has adopted key strategies to address its business challenges The company faces a lot of pressure from government regarding environmental protection and this affects the company the most in the USA The government has strict environment policies and regulations that any automobile company must meet in order to continue with its operations in the country These emissions are currently governed and regulated for most vehicles in the USA The types of emissions that are determined before a vehicle is given license to operate, include total hydrocarbon, nitrogen oxides, non8 methane hydrocarbons, particulate matter and carbon monoxide These analyses are carried out and determined by running the vehicles on a standardized test cycle These regulations determine the success of VinFast in the USA market, given the fact that these regulations are also ever changing and cover diesel and gas fuel vehicles with varying degrees Chart: Toxic industrial air pollution in the US Legal factors VinFast can promote its EV's as efficient energy and thereby can be sure it abides by international environmental regulations Also, the energy loan program of the US increases the chances of VinFast to produce more environmentally friendly cars The dealership sales regulation can be an opportunity and a threat at the same time On the one hand, VinFast might be able to grow through directs sales, which is allowed in many states in the US On the other hand, in any state where direct sales are not allowed it is considered a threat, since these states require dealerships to transact with customers in the automotive market IV MODE OF ENTRY Export is the most suitable method of entering the US market for VinFast This is also the easiest and most reasonable strategy It focuses on exporting directly with specific strategies to ensure a long-term foothold and affirm its name in the US • High chances of making greater profits because intermediaries are eliminated If VinFast exports indirectly, it has to share profits with middlemen • When VinFast is reaching foreign market, it becomes easier to extend the market to other proximate countries Vietnam enjoys the MFN regime, which helps VinFast export products to the US smoothly, avoid having to pay tariffs This will keep the product's selling price from being taxed and the final price when reaching consumers will be better received MFN principle can help Vietnam avoid tax barriers and bring many benefits for the company • Identify the potential buyers and their needs, as well as their buying behaviours Besides, marketing and delivery trips are effective and efficient because VinFast will have direct contact and interaction with the customers The US consumers can completely be conquered by cars from Vietnam with quality, high safety standards and equipped with modern technologies • More control with products and promotion VinFast can protect its trademark and copyrights, as well as official rights to its product • VinFast may consider switching to a new investment strategy by building a car factory in the US However, new investment in a difficult market like the US will not be a good strategy for the company, it will cost more and bring more risks than exporting • In September, 2020, California Governor Gavin Newson set out a roadmap to stop selling gasoline cars by 2035, aiming to make California a "zero-emissions" state This policy can be an opportunity for VinFast to sell electric cars and bring a variety of its products in the US market The company will have to prove a lot about the quality of a new car manufacturer, while offering it at a price that is competitive with many other brands, typically Tesla, which is already well known for its reputation In the far future, VinFast may consider building a car factory in the US after having many years of export experience in this country If VinFast is popular with customers, or achieves the minimum sales to maintain and make a profit, investing in the construction of a factory will not be too difficult This also needs to consider other factors such as political, legal, social analyzed in the PESTEL model 10 CONCLUSION After analyzing the PESTEL model and a majority of different sources of information, we see that the USA is one of the most powerful countries in the world and considered to be an extremely probable market for VinFast to export automobiles due to the following reasons below The first is that it has a stable political environment, sophisticated technology, and well-developed infrastructure Besides, the advantage of global in-house tech companies plays an important role in contributing a major portion to the country’s economy However, the threat of natural disasters, growing tech competition, and racial conflicts are real The US faces the problem of an aging population which can lead to a serious labor shortage and rising tax rates in the future VinFast, which has stable human and financial resources, is adapting to strict quality, safety and environmental standards in order to enter new markets It will face an uncompromising battle with many other famous brands such as BMW, Macza or Mercedes, Proton to succeed in foreign markets It also has to overcome the difficulty in convincing the US consumer market and those of other developed countries where emissions standards are absolutely strict Notwithstanding, experts said the US’s demand for high-quality Vietnamese products has been increasing because of changes in the global supply chain, and US firms see Vietnam as a potential, safe investment destination post-pandemic In addition, the products of VinFast are top-notch and able to meet most of the requirements and criteria above In a nutshell, VinFast’s strategy in spreading exporting cars to the USA could be attainable to achieve a number of goals from which it could benefit, for example, high profit, great support from the US customers, or market share and reputation With the ambition to be a global brand and meet the world’s highest standards, VinFast should make progress to take advantages, limit drawbacks and mitigate the risk when exporting automobiles to the USA or other developed countries 11 REFERENCES Lien Hoang, “Vingroup to export electric SUVs to US and Europe from 2022”, learn more: https://asia.nikkei.com/Business/Automobiles/Vingroup-to-export-electric-SUVs-to-US-andEurope-from-2022 VNA, “Vietnam has potential to boost exports to US”, learn more: https://en.vietnamplus.vn/vietnam-has-potential-to-boost-exports-to-us/201144.vnp Wikipedia, learn more: https://en.wikipedia.org/wiki/VinFast Jame Pearson, “Fast and serious: Vietnam's first domestic car manufacturer bets big”, learn more: https://www.reuters.com/article/us-vingroup-vietnam-autos-idUSKCN1MB1WN VietEcon, “VinFast wants to export cars”, learn more: https://www.vietecon.com/vietecon/2019/12/16/vinfast-wants-to-export-cars Sebastian Neumann, “Tesla, Inc and the world's transition to electric vehicles Risks, strenghts, opportunities and strategic reccommendations”, learn more: https://bit.ly/3hG1YFp UniqueWritersBay, “PESTEL Analysis of Volvo – USA Market”, learn more: https://bit.ly/3hDk0rB 12 ... Vietnam and the EU will be eliminated immediately or according to the 9-10 year schedule Accordingly, we make a report on VinFast’s strategy in exporting automobiles to the USA Vietnam and the US... international standards Mission: Mark the Vietnamese identity on the map of the global car manufacturing industry Vision: To become the leading car manufacturer in Southeast Asia - bringing together... its operators to make more savings VinFast, therefore, faces a number of challenges in order to meet the demand of its customers in the US market Technological factors The rapidly changing technology