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Doubts raised over cheap car assembly plan in Vietnam
Publication Date : 25-08-2014
A Vietnamese auto company's plan to assemble and sell the world's cheapest car in Vietnam has been met with skepticism as the market seems lukewarm to cheap cars.
TMT Motor, a prominent importer and assembler in the capital city, has announced on its official website cuulongmotor.com that it had been recruting new staff for its plan to trade Tata Nano in Vietnam.
A source familiar with the plan also revealed that TMT Motor was considering assembling Tata Nano in the country to further cut the price for assembling the world's cheapest car.
Experts are describing the plan as adventurous since cheap cars have previously fared poorly in the Vietnamese market. They noted that Tata Nano itself had not been selling well in India and other countries.
Over the last five years, a number of cheap cars had been offered in Vietnam, in a bid to meet wider demand in one of the region's largest emerging auto markets, but the attempts had ended in failure.
One example is Cherry QQ3, a popular cheap car from China. Marketing for the 800cc minicar, worth 195 million dong (US$9,300) each and dubbed as the cheapest sedan in Vietnam began in 2009.
Inspired by an ambitious plan anchored on sales to middle-income buyers in Vietnam, the company invested heavily in advertising. Only 146 units were sold in 2012 and only one was sold in 2013.
Cherry Riich M1, another cheap brand, had a similar experience, with only 50 units of the 1,000 cc car sold in Vietnam since 2010.
The dream for BYD F0, another cheap Chinese brand, also turned sour after a number of its dealers were closed because of stagnant sales.
The 250-million-dong ($11,900) middle-size sedan even failed to join the low-priced taxi fleet even after it was fitted with high-grade equipment such as anti-lock braking systems (ABS), electronic brakeforce distribution (EDB), CD/Mp3 players and remote keys.
"It turns out that Vietnamese aspiring to be middle class want cheap cars, but they don't want cars that look cheap and are willing to pay more for a vehicle that has a more upmarket image," said Nguyen Van Dung, General Director of Northern Automobile, a prominent car dealer in Ha Noi.
Two years ago, TMT Motors imported two Tata Nano cars for its market study and for introduction to potential buyers in Vietnam. The company made no official announcement of its plan to trade the car, but rumours about it have spread following its announcement of its plan to recruit staff on its website.
Meanwhile, industry insiders are worrying about the fate of the car in Vietnam, especially in the context of world developments.
When the Tata Nano, a stripped-down minicar priced at around $2,000, was introduced in 2009, it was marketed as a car that would transform the way aspiring consumers in India and other developing countries travelled.
But the low-cost automotive revolution fizzled. Selling poorly at home and with exports drying up, the Nano has become a cautionary tale of misplaced ambitions and a drag on sales and profit at Tata Motors Ltd, India's fourth-largest auto maker and the owner of Jaguar and Land Rover luxury vehicles.
Now, Nano is trying remake the "people's car" into the "cool people's car." It has given the auto a face-lift, adding a stereo, hubcaps and chrome trim, raising its price and starting a new marketing campaign to give it more spin.
If the remake fails to boost sales of the Nano, a Tata mainstay, the company's outlook could become grim. Tata Motors has been laying off workers and cutting production. Analysts say that without a revival in Nano demand, Tata Motors could further cut jobs next year.
Insiders say Tata made a big bet on the Nano, spending close to $400 million to develop the vehicle and hundreds of millions more to build a factory capable of manufacturing 15,000 to 20,000 of the tiny cars a month. But the company sold only around 2,500 a month, down from a peak of about 10,000 in April 2012.