VIETNAM BUSINESS REVIEW

A QUICK GLANCE OF THE CAR MARKET IN 2020

March 15, 2021

1 INTRODUCTORY

Due to the impact of the COVID-19 epidemic, the auto market in 2020 is less active than in previous years. However, with the increasing demand for car ownership and road travel, the car business will continue to grow. The year 2020 is also a milestone for many FTAs in effect, which will lead to more fierce competition between domestically-assembled cars and imported cars. The Vietnamese government has also launched various policies to boost domestic automobile production. Therefore, in this report, SEIKO IDEAS gathered some remarkable information about the automobile market in the past year. The contents of the report include: • Domestic car business situation • Vehicle import and export situation • Related policies

2 LIST OF CONTENTS

Domestic car business situation

Vehicle import and export situation

Related policies

3 DOMESTIC CAR BUSINESS SITUATION

Consumption of domestically-assembled vehicles Proportion of domestically-assembled per year cars consumed over the years (%) (Unit: thousand units) 323 Domestically-assembled car Imported car 304 297 286 276 24.84 28.58 24.95 31.89 41.37

75.16 71.42 75.05 68.11 138 58.63 124 116 118 120 123 122 122 108 114

39 45 40 2016 2017 2018 2019 2020 32 29 Proportion of cars consumed (%)

2016 2017 2018 2019 2020 Tourist Vehicles Commercial vehicles Special – purpose vehicles 2.47 1.61 1.29 Nationwide Northern Central Southern 5.17 4.99 29.07 24.86 24.14 34.83 38.79 VAMA's vehicle classification • Tourist car/ small car (passanger vehicles): passenger car with less than 9 seats 68.44 73.52 74.55 • Commercial vehicles: vehicles with 10 seats or more, with 1 59.98 57.25 or 2 floors and cargo vehicles • Special – purpose vehicles: vehicles for special purposes (ambulance, fire truck, water truck, ...) 2016 2017 2018 2019 2020 4 Source: SEIKO IDEAS compiled from the Vietnam Automobile Manufacturers Association (VAMA) monthly report DOMESTIC CAR BUSINESS SITUATION

SMALL CARS Other, 5 Cross-over, Northern Southern 8.4 South, Northern, Sedan MPV, 13.5 -43919 34764 41.66 43.53 CAR BUYING RATIO SUV VEHICLE -24734 27034 BY REGION 2020 (%) CONSUMPTION BY MPV VEHICLE TYPE Sedan, 44.4 -8594 16010 Cross-over -8863 6665 Central, SUV, 28.7 14.81

Producer market share (%) Number of car brands according to the number of seats 34.50 38.78 27.02 32.69 5-seater car 7-seater car 31.49 29.98 30.99 33.25 12.37 10.57 59,624 16.83 51,290 12.66 Nationwide 11.31 1.07 16.45 Northern 19,336 21,719 10.18 11,780 13,053 13,291 Central 4,988 11,780 7,340 4.70 1.69 4.98 Southern 5.59

5 Source: SEIKO IDEAS compiled from the December report of the Vietnam Automobile Manufacturers Association (VAMA). DOMESTIC CAR BUSINESS SITUATION

COMMERCIAL VEHICLES Small truck (≤ 5 tons) Other, 8.46 Van, 2.4 Northen, Southern, 41.29 Light truck, 46.18 20.08 56.08% VEHICLE CAR BUYING RATIO Pick-ups, CONSUMPTION BY BY REGION 2020 (%) 31.2 VEHICLE TYPE 2020 (%) Light truck (5 ~10 tons) Central, Small truck, 12.18 37.86

Pick-up truck manufacturer market share 63.13% by region (%) Pick-up 62.15 67.98 72.86

16.50 12.50 Medium truck (10 ~ 24 tons) 10.61 Northern 13.77 14.54 Central 67.4% 7.30 Southern 6.78 4.97 7.62 90.01%

0.80 0.00 1.61 6 Source: SEIKO IDEAS compiled from the December report of the Vietnam Automobile Manufacturers Association (VAMA). DOMESTIC CAR BUSINESS SITUATION

BUS Minibus (10 – 16 seats)

Other, 1.5

Northern, Large buses 41.48 (31 - 55 Southern, seats), 91.06 91.06 49.37 42.35 CAR BUYING RATIO VEHICLE Medium bus (17 – 30 seats) BY REGION 2020 (%) CONSUMPTION BY VEHICLE TYPE 2020 Mini bus (%) (10 - 16 seats), 52.21 Central, Medium 8.64 bus (17 - 30 seats), 3.94 100 SPECIAL-PURPOSE VEHICLES Large bus (31 – 55 seats)

Northern, 31.52

Southern, 70.96 50.35 CAR BUYING RATION BY REGION 2020 (%)

100 Central, 18.13

7 Source: SEIKO IDEAS compiled from the December report of the Vietnam Automobile Manufacturers Association (VAMA). VIETNAM AUTOMOBILE MANUFACTURER

Thanh Cong Group Joint Stock Company (TC Motor) Founded year : 2008 VinFast Manufacturing and Trading Company Best-selling cars in 2020: Limited Founded year: 2017 Hyundai Accent 20,776 cars Best-selling cars in 2020:

Fadil 18,016 cars Partner : Partners:

Truong Hai Auto Joint Stock Company Founded year: 1998 Best-selling cars in 2020:

KIA Cerato 12,033 cars Saigon Transportation Mechanical Corporation Partners : Market share : Founded year: 1975 12.8% Best selling car Best-selling cars in 2020 :

SAMCO B40 ~ B80 200 cars Do Thanh Automobile Joint Stock Company

Partners: Market share: 19.1% Founded year: 1992 Best selling car Best-selling cars in 2020 :

VIDABUS BC095 32 cars

Partners Market share : 49.3% Best selling car

8 Source: Summarized according to December reports of VAMA, TC Motor and VinFast HONDA VIETNAM TOYOTA VIETNAM Founded year: 1995 Founded year: 2005 Best-selling car in 2020: Best-selling cars in 2020:

CRV (CKD) 7,438 xe Toyota Vios 30,251 xe

Partner : Market share: 7.7% Partner: Market share: 32.2% Best selling car Best selling car

FORD VIETNAM MERCEDES-BENZ Founded year: 1995 Founded year: 1995 Best-selling cars in 2020: Best-selling cars in 2020: Ranger Khác 13,291 xe Partners: Market share: BM 4% W Luxury car: 9%

Lexu Partner: Market share: s Merc 62.1% 22% edes- (Pick-up models) Benz 65%

ISUZU VIETNAM MITSUBISHI VIETNAM Founded year: 1995 Founded year: 1994 Best-selling cars in 2020: Best-selling cars in 2020: QKR (4,350 kg) 5,255 xe SPANDER 15,954 xe

Partner : Market share: Partner : Market share: 21.9% 16.6% (Truck) Best selling car

9 Source: Synthesized according to VAMA's report VEHICLE IMPORT AND EXPORT SITUATION

THE NUMBER OF AUTOMOBILE IMPORTED PER YEAR Proportion of car types by import volume (%)

140 73 1263.0 3.1 72 113 64 66 105 97 2.4 2.2 2.3 45 82 50 44 41 71 1.8 43 40 55 1.6 36 42 29 38 39 30 1.0 36 27 21 21 0.8 17 19 19 0.6 13 12 12 7 5 6 0 1 2 1 1 1 1 13 0 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Volume (thousands of units) Value (billion USD) Car with 9 seats or less Car with over 9 seats Transportation car Other cars MAJOR IMPORT MARKETS (2020)

Other vehicles (special- Car with up to 9 seats Truck Automobile Components and Spares purpose vehicles)

20% 13% 23% 22% 27% 43% 7% 17% 44% 77% 59% 18% 12% 18%

Indonesia Thailand Thailand Other Korea Thailand Japan Other China Korea Mexico Other Indonesia Other 10 Source: SEIKO IDEAS Compiled from website of General Department of Customs VEHICLE IMPORT AND EXPORT SITUATION

Vietnamese companies aim to export cars to foreign countries

1% 2020 Export: 11% 1,407 Electric vehicle export bias car types 2021: Receiving orders 2022: Delivery 20% 45% Kia Grand Carnival Kia Cerato Kia Soluto Sơmi rơmoóc VF33 23% Xe tải America MARKET VF32

Canada Kia Grand Carnival Thailand

Kia Cerato Myanmar Building the second factory to prepare resources for export Cooperation: Huyndai Factory address: Ninh Binh Capacity: 100,000 vehicles / year Kia Soluto Myanmar 11 Source: SEIKO IDEAS Compiled from VNExpress newspaper and official websites of Thaco, Vinfasr, TC Motor RELATED POLICIES

GOVERNMENT POLICIES FOR VIETNAM AUTO INDUSTRY

• Allow to import new cars in complete • Increasing special • Increasing special consumption units (Import Tax: 100%) consumption tax 24% -> tax 30% ~ 50% 2006 2004 • Increasing special consumption tax by 2005 40% • Reducing import tax -> 90% 5% -> 24%

• Increasing import tax-> 83% • New registration fee • Entering WTO • Increasing registration fee 10% -> 15% • Hanoi: 12% - Other area: 10% • Reducing import tax 3 times

2009 • 2007 2008 Adjusting the special consumption tax 90% -> 80% -> 70% -> 60% calculation mechanism

• Increasing registration fee -> 10% ~ 20% • Reducing import tax • Reducing import tax from ASEAN • Decree No. 20/2011 / TT-BCT supplementing from ASEAN countries countries (according to ATIGA) to 40% 2014 2016 2011 procedures for importing unused cars with (according to ATIGA) • Changing the calculation of excise tax less than 9 seats to 50% from cost to wholesale price

• Decree 70/2020 / ND-CP: 50% reduction • Reducing import tax from ASEAN • Decree 116/2017 / ND-CP tightening of registration fee for locally countries (according to ATIGA) to procedures for the import of used

2020 manufactured or assembled vehicles 2018 0%used car import 2017 carsDecree 125/2017 / ND-CP: import tax on • Reducing import tax from EU countries • Adjusting of excise tax calculation auto parts -> 0% (according to EVFTA): 7% schedule per according to cylinder capacity year TAXES AND CHARGES FOR AUTOMOBILE CROSS PRICE FORMING

Imported cars 0-70% 20% 35-150% 10% 10-12% - Registration fee, number plate - Registration fees, road maintenance Import Shipping Special VAT Registration Tax costs, consumption tax fee fees regulated tax - Civil insurance, body insurance profit - Corporate income tax Produced or 5-25% 20% 35-150% 10% 10-12% - Environmental protection tax in petroleum domestically Registrat Import tax LN Special VAT - Test fee (emissions, fuel consumption) -assembled car on loose distribution consump ion fee tax - Fees for certification of energy labels Source: SEIKO IDEAS compiled parts channel, tion tax agent 12 RELATED POLICIES

STRATEGY FOR DEVELOPING VIETNAM AUTO INDUSTRYBY 2025, VISION TO 2035

ESTABLISHING A BIG SCALE ENTERPRISE - Vehicle manufacturing enterprises, prioritizing capacity of over 50,000 An important driving force to promote vehicles / year industrialization and - Engine parts producing enterprises, gearboxes, transmission assemblies modernization

Focus on development:

Car is suitable for Vietnamese people DOMESTIC MANUFACTURING VALUE RATIO

Environmentally friendly By 2020 By 2025 By 2035 Cars with up to 9 seats car: eco car, hybrid ... Cars with up to 9 30~40% 40~45% 55~60% Products for agriculture seats and rural areas Car from 10 seats 35~45% 50~60% 75~80%

Trucks and passenger cars Specialized vehicles Truck 30~40% 45~55% 70~75%

Strengthening international Special – purpose 25~35% 40~45% 60~70% cooperation in vehicles production of components and spare Supporting industry parts 13 Source: SEIKO IDEAS compiled SUMMARY • The volume of domestic vehicles sold in 2020 will decrease compared to 2019 due to the economic slowdown (the main reason is the impact of the disease) • The purchasing power of the market in the North and the South was stronger than that of the Central region. In particular, the North consumes more Sedans than the South, and the South consumes more SUVs, Cross-overs and Hatchbacks than the North. • Thaco and Toyota are assemblers with a large market share in the Vietnamese market and the highest sales volume is Toyota's Vios (with 30,291 units). • The automobile assembly factories are concentrated in two major economic clusters, the North and the South. In particular, foreign businesses often choose to cooperate with domestic assemblers. • The consumption of imported cars is maintained at less than 40% of the market share of the automobile market due to the government's policies on tax and fees on cars. • Vietnam mainly imports cars with less than 9 seats and trucks from factories in Southeast Asia; specialized vehicles imported from China; production packages imported from Japan and Korea • Manufacturers in Vietnam such as Thaco and Vinfast have plans to export CBU vehicles abroad

14 CONTACT

SEIKO IDEAS CORP. q Website: www.seiko-ideas.com q TEL (＋84) 246 2755426 (＋84) 246 2736989 q FAX： (＋84) 246 2736988

(Ms.) Dang Thu Trang (＋84) 967 397 289 [email protected]

(Ms.) Huynh Thi Ngoc Nga (＋84) 962 061 694 [email protected] 15