The Vietnamese Mechanical Industry’s Evolution: Overcoming Challenges for a Brighter Future
Vietnamese businesses have become tier-1 suppliers to foreign partners. (Photo: Duc Duy/Vietnam+)
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Vietnam’s mechanical industry has witnessed positive transformations, making significant strides in technology ownership, investment expansion, and product quality enhancement, alongside localization and market development.
Despite the immense growth potential, experts assert that market diversification remains challenging for businesses in this sector due to intense competition from foreign companies, coupled with low competitiveness, lack of branding, and inability to attract potential customers…
A Large Market Potential
According to expert estimates, from now until 2030, the mechanical market demand is projected at around $310 billion, with the automobile market alone accounting for $120 billion. However, Vietnam currently meets only one-third of this demand.
Dr. Phan Dang Phong, Director of the Institute of Mechanical Research (Ministry of Industry and Trade), shared that in automobile and motorcycle production, several years ago, most assembly lines were handled by foreign entities. However, since 2012, the Institute of Mechanical Research has sent engineers to learn and acquire technology transfers from Japanese and Korean companies. As a result, the Institute now independently designs and manufactures automobile assembly lines.
In the field of renewable and new energy, the institute successfully adopted and transferred technology for floating and anchoring systems for solar energy projects. Furthermore, numerous domestic enterprises have demonstrated complete self-reliance, from design to fabrication and technical services, as evidenced by the Son La 2,400 MW and Lai Chau 1,200 MW hydropower projects, which were completed ahead of schedule.
Nevertheless, according to Mr. Phong, the industry’s response to the domestic and export mechanical markets remains modest, particularly in the field of comprehensive equipment. For instance, in thermal power, hydropower, new and renewable energy, cement, or raw material production, local businesses meet less than 30% of the equipment demand.
“The reason for not meeting the demand is the lack of ‘leading enterprises’ that own core technologies and have the capacity and experience to execute turnkey projects,” Dr. Phan Dang Phong explained.
Numerous Vietnamese businesses have become tier-1 suppliers to foreign partners. (Photo: Duc Duy/Vietnam+)
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Mr. Nguyen Duc Cuong, Vice President of the Hanoi Supporting Industry Association, pointed out that in the field of machine manufacturing, FDI enterprises dominate the production landscape in Vietnam. Local businesses primarily produce spare parts and accessories to supply back to these FDI companies.
Typically, domestic enterprises (mostly small and medium-sized) take 1.5 times longer to manufacture a product than their foreign counterparts due to the latter’s technological superiority. Consequently, the FDI sector benefits from automation in human resources, quality control, measurement, and other aspects, resulting in lower management and production costs and heightened competitive edge in pricing.
Transforming for a Breakthrough
According to the Vietnam Association for Mechanical Industry (VAMI), there are approximately 3,100 mechanical manufacturing enterprises in the country, with 53,000 production facilities, accounting for nearly 30% of the total number of processing and manufacturing enterprises in Vietnam. The domestic mechanical industry—machinery, equipment, and tools—has gradually mastered and improved localization, driving the development of other industries and the economy, directly and indirectly employing millions of workers.
Currently, Vietnam’s mechanical industry strengths lie in three main sub-sectors: motorcycles and motorcycle components and spare parts; household appliances and tools; and automobiles and automobile components. The industry’s revenue exceeds VND 1.7 quadrillion and employs over 1.2 million workers.
At present, locally produced metal components meet 85-90% of the demand for motorcycle manufacturing, 15-40% for automobile manufacturing, 20% for integrated equipment, 40-60% for agricultural machinery and engines, and 40% for construction machinery. Additionally, the industry supplies metal components for high-tech industries, meeting about 10% of the demand.
Notably, the domestic mechanical manufacturing industry now assembles various car models, including passenger cars, trucks, and buses, and has achieved a localization rate of 85-95% in motorcycle production, meeting domestic demand and exporting to foreign markets. Notable enterprises in the automobile sector include Vinfast, Thanh Cong, and Thaco.
Moreover, mechanical businesses are poised to capitalize on Vietnam’s participation in numerous free trade agreements. These agreements will enhance their export competitiveness, expand their markets, and attract more foreign investment.
Automation is crucial for enhancing competitiveness. (Photo: Duc Duy/Vietnam+)
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Mr. Cao Van Hung, Director of International Market Development at Smart Vietnam Precision Mechanics Joint Stock Company, shared that in recent years, Vietnamese businesses have benefited significantly from the shift in international markets. As evidence, he cited Smart’s estimated revenue growth of 260-280% in 2024, attributed to surging demand from existing customers and new clients from key markets.
To seize market opportunities, Smart has heavily invested in its sales and research and development (R&D) teams. The sales team comprises capable individuals who can communicate and collaborate with partners from diverse countries, bringing projects to Vietnam. “As long as customers have ideas and samples, Smart will develop and help them create a complete product in Vietnam,” Mr. Hung shared, highlighting the company’s recent successes.
However, to enhance competitiveness in quality, Smart’s representative emphasized the need for investments in raw materials, machinery for production automation, international quality management processes, and a high-caliber workforce.
“Businesses hope that ministries and sectors will organize more trade promotion programs abroad to support customer connections. Additionally, for enterprises aspiring to become ‘leading enterprises,’ substantial resources are required, so policies should focus on the R&D aspect,” Mr. Hung recommended.
Emphasizing this perspective, Dr. Phan Dang Phong suggested that businesses should also collaborate with the Trade Promotion Agency to promote their products in overseas markets and learn from successful enterprises in those markets to minimize risks. Furthermore, they should invest in human resources, equipment, and technology to own their unique technologies, adapt to customer requirements, modernize production lines, and ensure competitive pricing and consistent quality, fostering sustainability in the global value chain.
Duc Duy
– 08:52 01/01/2025
