The Bao Viet Securities Company estimated that the Vietnamese tire market is valued at VND17.89 trillion, or $852 million, and predicted that the CAGR (Compound Annual Growth Rate) would be 6.9 percent per annum in the 2013-2018 period.
The removal of the tariff on car imports by 2018 under the ASEAN Free Trade Agreement (AFTA) is believed to lead to higher demand for cars. It is expected that 2.2 million cars would be bought by 2018.
Meanwhile, motorbikes would remain the major means of transport for Vietnamese, accounting for 60 percent of total means of transport. It is expected that motorbike consumption would increase by 3 million year after year.
In 2015, tire manufacturers received big benefits from the natural rubber price fall (the cost for rubber accounts for 57 percent of total cost for input materials, including 34 percent of natural rubber and 23 percent of synthetic rubber), and the record high number of cars sold – 245,000.According to the HCMC Rubber – Plastics Association, the markets for tires for motorbikes, bicycles and heavy trucks (bias tire), and specialized vehicles (OTR tire) are still dominated by Vietnamese manufacturers.
Da Nang Rubber Company (DRC) dominates the central region, while Southern Rubber Industry JSC (CSM) holds the southern region and Sao Vang Rubber JSC the northern market.
Vinachem holds the controlling stakes (50-51 percent) in all three companies.
Meanwhile, the market for tires for cars is controlled by foreign manufacturers. An analyst commented that making high-technology radial tires is not the strength of all DRC, CSM and SRC.
“This is the playing field of foreign invested enterprises’ (FIEs) products or imports from Thailand, Japan and imports from China across the border gates which account for 80 percent of market share,” the analyst said.
CSM, which understands the growing tendency of radial tires in the world market (the tires can be suitable to all types of roads, especially highway). In 2014 it put its radial tire factory into operation. In the first phase, the factory can produce 1 million products a year.
Prior to that, in 2013, DRC also put a radial tire factory with the capacity of 600,000 products per annum into operation in Lien Chieu Industrial Park.
However, the capacity of the factories developed by Vietnamese manufacturers remains modest compared with FIE factories.
Japanese Bridgestone, for example, in 2014, opened a radial tire factory which can put out 24,700 products a day. It is expected that the capacity would be 49,000 products a day by 2017.