Brainstorming Session No.2

Market situation in Thailand, Indonesia and Vietnam: Basic recognition

 June 14, 2006

Mr. Hiroaki Funami, General Director of Honda Vietnam, presented his basic understanding about the motorbike industry in Vietnam and neighboring ASEAN countries using available data. From his point of view, the motorbike is the most suitable transporter in ASEAN countries because of climate condition and poor public transportation systems. A comparison of railway networks of Tokyo and Bangkok was made to emphasize the second point.

Special attention was given to the factors that influenced the market expansion of the motorbike industry. They include: (i) the level of economic development in terms of GDP growth rate, (ii) inflation, and (iii) market interest rates. Besides this, traffic accidents and environmental pollution should also be considered in the context of ASEAN countries. The traffic situation may become much more severe in Vietnam since the number of deaths caused by motorbikes is increasing.

Mr. Funami then introduced quantitative data on the motorbike industry in Vietnam, Thailand and Indonesia. The person-per-motorbike ratio is approximately 3 in Thailand, 9 in Indonesia, and 6 in Vietnam. In Thailand and Indonesia, Japanese makers have a strong advantage over Chinese motorbikes as indicated by their market shares and the volume of motorbikes. In Vietnam, by contrast, the situation is different and more dynamic. For example, the share of low-price “Chinese” motorbikes in the year 2000 was more than 70%. The environmental factors such as the emission and noise control regulation schedule in EU, Japan, China, and ASEAN countries were thoroughly discussed.

Participants commented mainly on following issues: (1) the correctness of data, (2) the potential impacts of environmental regulations on motorbike producers, and (3) how and when to apply environmental regulations.

First, some of the presented data were estimates and may differ depending on sources. For example, the past share of Chinese motorbikes in the Vietnamese market is imprecise since not all assemblers reported their production to the authorities. In addition, the number of motorbike accidents may be different from the reality. Correct data is necessary to forecast future demand and to assess the social aspect of motorbike use.

Second, potential impacts of environmental regulations on motorbike producers were discussed. Japanese producers can technically introduce environment-friendly products in the Vietnamese market, since they have many experiences in complying with high environmental standards in Thailand, Indonesia and elsewhere. However, the motorbike prices in Vietnam will be raised, since they need to import a number of parts related to carburetor, fuel injection, catalyzer, etc. to meet a higher environmental requirement. However, one participant noted that there was no evidence in any country that the implementation of environmental regulation led to higher prices.

Finally, participants discussed the right way and timing to enforce environmental regulations.  While high standards may seem generally desirable, they will not be effective in countries where consumers are unwilling to pay more for clean air, and where institutional capacity to enforce the rule uniformly does not exist. In such a case, violating firms will prosper and honest firms will be disadvantaged or even eliminated due to price competition. It was argued that fair and transparent enforcement was a precondition for stricter environmental regulations.

[by Le Ha Thanh]