GM Korea-owned plant in Vietnam would continue building Chevrolets under new owner.
GM Korea-owned plant in Vietnam would continue building Chevrolets under new owner.

GM Korea to Sell Vietnam Operation to Startup Competitor

Under the proposed partnership, VinFast would acquire GM Korea’s Hanoi plant and produce Chevrolet vehicles under license there. VinFast also would take over all Chevrolet dealerships and sales and service operations in the country.

GM Korea intends to sell its Hanoi assembly plant and other assets in Vietnam to a startup automaker that has yet to produce its first vehicle but is a potential competitor to the country’s General Motors subsidiary.

While no definitive agreement for the sale has been signed, GM at the end of June announced a strategic partnership with VinFast Automotive Group. The deal is to be finalized by year’s end.

Under the plan, VinFast would acquire GM Korea’s Hanoi plant for an undisclosed amount and produce Chevrolet vehicles under license there. VinFast also would take over all Chevrolet dealerships and sales and service operations in the country. This would include marketing Chevrolet vehicles imported as completely built-up units from GM’s Rayong plant in Thailand.

GM has designated Rayong as its Southeast Asia production hub for the Colorado pickup and Trailblazer SUV, and it exports the vehicles to all regional markets except China. Both models are successful in Vietnam, in part because the government eliminated tariffs on CBU imports Jan. 1.

Of the 10,576 vehicles GM Vietnam sold in the domestic market last year, 3,082 were Colorado models imported from Rayong. The rest were a mix of Chevrolet Aveo, Captiva, Cruze, Orlando and Spark models assembled at the Hanoi plant from parts kits imported from GM Korea. In total GM Korea shipped parts for 7,618 vehicles to Hanoi, which has capacity to produce only 30,000 units annually.

GM Vietnam in May added to its domestic offerings the Trailblazer 7-seat SUV that is imported from the Rayong plant. The Trailblazer and Colorado are on track to account for more than 10% of GM Vietnam’s 2018 sales.

If GM sells the Hanoi plant, GM Korea would continue to export parts kits to the operation and GM Vietnam would work with VinFast to increase sales of its Colorado and Trailblazer models in the country.

VinFast would pay royalties to GM for every Chevrolet it produces for the local and export markets. Colorado and Trailblazer models, however, likely would continue to be imported from Thailand as CBUs and not built in Vietnam. VinFast says it will invest an undisclosed amount of money into the Hanoi plant but provides no details.

VinFast, which hired former GM executive vice president James DeLuca as its CEO last September, has production plans of its own. It says its goal is “to become the leading automobile manufacturer in Southeast Asia, having a...capacity of 500,000 units per year by 2025.”

The company plans to launch two vehicles, a 5-seat sedan and a 7-seat SUV (below, left) sold under the VinFast brand, in third-quarter 2019. Prototypes are to be displayed at the Paris auto show in October.

The vehicles will be assembled at a $1.5 billion plant under construction at Cat Hai, an island near Haiphong in northeast Vietnam. They were designed by Italian design house Pininfarina, which is owned by Indian conglomerate Mahindra Group, and are said to incorporate technologies licensed from BMW and components specialists such as Bosch and Siemens.

The plant’s capacity is targeted at 100,000 units in its launch year and 200,000 in its first stage. Besides the new VinFast models, the first stage includes production of electric motorbikes. Motorbikes still are the primary means of private transportation in Vietnam.

VinFast also has said it plans to manufacture electric cars and buses but has not provided specifics.

Although it is headed by DeLuca, a former GM production specialist, VinFast – formed last year – has no experience in developing, producing, selling or servicing vehicles. It is part of the Vingroup conglomerate that, among other businesses, operates a vast retail-store chain, develops real estate, owns amusement parks, produces cellphones and markets medicines.

The Hanoi plant, however, would give Vingroup immediate production access to GM’s current range of light vehicles, and it would continue selling the popular Colorado and Trailblazer imported from GM Thailand.

Commenting on the proposed GM-VinFast partnership, a GM Korea spokesman says: “This is a smart move and with the unique market conditions in Vietnam, this strategic alliance will greatly increase production capacity at the existing Hanoi plant through building VinFast products licensed by GM.”

The tentative partnership is the first evident reshuffle of production operations under the newly formed GM Southeast Asia unit, which oversees all GM production and sales operations in the region, excluding China. The automaker earlier ended manufacturing in Australia and Indonesia and halted production for the local market in India.

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