Vietnam Industrial Market Seizing Opportunities From The Automotive Sector
On 17th July 2019, there were 650 Fadil cars delivered to Vietnamese customers, three days after the official launch of Vinfast automotive manufacturing factory in Hai Phong.

The car is one of the very first “made-in-Vietnam” automotive vehicles of the VinFast car family. The continuous impressive events of VinFast, to somewhat extent, marked a strong transformation of the Vietnam Automotive Indsutry. The story behind Vingroup’s car ambition is not only encapsulated in magical words but also showing a robust growth in industrial property demand for the four-wheel vehicles manufacturing.

In Vietnam, manufacturing shift from Mainland China, recent rapid changes in domestic regulations and international trade agreements have had a significant impact on the industrial market. From the real estate perspective, the most important aspect for market shift and macroeconomic conditions is the increased industrial land demand serving expansion of industrial production.

Even thought the automotive industry in Vietnam is still underdeveloped in terms of production and manufacturing development compared to other ASEAN countries, the accumulation of industrial land banks for the industry has been increasing. Local big players in the market has already had their plans to build up enormous automotive manufacturing hubs such as THACO with Chu Lai - Truong Hai Complex (Quang Nam province) and VinFast with its automotive complex in Hai Phong City. Furthermore, well-known foreign car assemblers, including Toyota, Mitsubishi Motor, Mercedes-Benz, has been also releasing their own expansion plans. The expansion is strongly supported by the rapid improvement of expressway networks and deep-sea ports connecting industrial and logistics hubs.

Not only assemblers but also car part manufacturers and suppliers has also joined the game with increasing land enquiries recorded in recent years. Demand generated widely from clients varying in all of car parts production, implicating an enhance of automotive supply chain.

Thailand and United State of America, the two automotive giants of each respective continents, presented their own lesson learnt proving the booming of industrial real estate market thanks to the escalated concentration of automotive makers and suppliers in specific geographical locations. Besides, high occupancy and rising rental rates challenge the expansion of manufacturing and create a demand shift to emerging markets. We are also seeing the same trends in Vietnam when traditional industrial markets in the Northern and Southern area are maturing with limited land bank and very high rent rate.

However, this could also be an opportunity for real estate developers to note the increasing demand for production expansion amid the current limited supply. At the same time, each region in Vietnam has distinct competitive advantages based on the difference in business and production nature as well as land availability.

The Vietnamese automobile industry still has much to do to reach a golden period and compete with regional rivals. The role of policy-makers is considered the most vital, but the industry needs more than that to thrive. In which, industrial real estate developers can seize opportunities from the growth by offering not only land bank/ storage space but also intergrated industrial and logistics infrastructure, specialized in automotive manufacturing, to car makers and suppliers.

Source: CBRE Vietnam