Vietnam and Škoda: promising market and gateway to southeast Asia

A dynamic country, where the number of cars on the roads is catching up with the number of mopeds, they have massage chairs in car showrooms and there are very strong links to Czechia. That’s Vietnam, where Škoda is starting to sell and will also soon produce cars.

26. 9. 2023 Škoda World

Vietnamese customers have specific requirements and prefer personal contact with salespeople. Car dealerships are located on the outskirts of cities, with smaller branches in the centre, for example in large shopping centres, as close to customers as possible. There, customers can arrange a test drive, which then happens at the dealership itself. Choosing a car takes time and involves a detailed inspection of the car under consideration – so there are refreshments or massage chairs available at the dealership. The customer usually wants the car right away, so he chooses from the cars the dealer has in stock.

Martin Jahn, Škoda Auto Board Member for Sales and Marketing (on the right) and Le Do, General Director of Škoda project, at the official event, celebrating Škoda Auto’s market entry in Vietnam.

These are the kind of scenarios Škoda has to prepare for. The Czech carmaker is currently launching sales on the Vietnamese market and in the near future it will also start production in the Asian country. Daniel Vošvrda, Škoda COO in Vietnam, explains why Škoda chose Vietnam. “There were several reasons: good relations and close links between the two countries, a strong Vietnamese community in the Czech Republic, the developing automotive industry in Vietnam, a skilled workforce or the fact that local companies are not afraid to invest and cooperate.”

The support of the Czech Embassy in Vietnam and the fact that many Vietnamese have studied or worked in the former Czechoslovakia and are therefore no strangers to Czech companies or the Czech language played an important role in the selection of the local partner, Thanh Cong Motor Vietnam (TC Motor). “The Czech Embassy in Vietnam recommended three companies, and we held talks with them. After detailed negotiations, our current partner turned out to be the best choice. In 2022 we started fine-tuning the contract and set the planning process in motion,” recalls Vošvrda.

During the launch event, Vietnamese journalists took a keen interest in the Kodiaq model, among others.

Moving into the Vietnamese market offers an opportunity to exploit synergies with the India 2.0 project, which is developing models for multiple VW Group brands under Škoda’s leadership. The two countries have similar requirements for cars, and legislation in Vietnam supports the import of so-called CKD (Completely Knocked Down) cars and their local assembly. The number of vehicles per thousand inhabitants in Vietnam is currently relatively small compared to other countries, but the growth is rapid. A stable presence in Vietnam also holds promise for further expansion in southeast Asian markets.

Imports from Europe and India

The Vietnamese car market is dominated by new vehicles, which are gradually replacing the ubiquitous mopeds. Sales are growing, with more than three hundred and fifty thousand vehicles sold per year, up from one hundred thousand not so long ago.

Škoda is planning its activities in Vietnam with the ambition to expand and gradually increase its market presence. This year the Karoq and Kodiaq models will be imported from Europe, while next year will see the import of the aforementioned CKD vehicles from India and the start of production in Vietnam, at a plant now being built in Quang Ninh province.

Transportation of Škoda cars to Vietnam

Škoda Auto also plans to establish a dealer network in Vietnam. “The target is twenty dealerships in 2025, and up to thirty points of sale by 2028,” says Martin Jahn, Škoda board member for sales and marketing.

Connectivity and safety for motorcyclists

Customers in Vietnam are keen on features such as air conditioning, electrically adjustable seats, leather upholstery and disc brakes. Design plays a big part, and there is a lot of focus on connectivity, including mobile phone integration.

Interior of the Škoda Vietnam showroom

And what’s it like on the roads in Vietnam? Traffic in the cities is very dense and traffic jams are the order of the day. Add to that the ubiquitous mopeds and pedestrians who have to show a lot of courage to venture into the chaos. As a result of all this, road traffic is somewhat slower. That’s also true on motorways, where the local limit is 120 km/h, but most of the time cars drive slower.

Škoda has adapted its vehicles to local conditions and safety standards. “Something that is being assessed, for example, is safety for motorcyclists,” Vošvrda adds. Models for the local market are equipped with features such as Lane Assist and medium-range radar, among other things.

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Who is your new business partner and why did you choose them?
Thanh Cong Motor Vietnam (TC Motor) is one of the largest and most financially stable companies on the Vietnamese market. It is headquartered in Hanoi and has an extensive portfolio of businesses, including automotive, residential and office property projects, hotel complexes and industrial estates. Škoda chose to partner with TC Motor because of its strong market position, active investment in industrial zones and ability to contribute to the economic development of the entire region. For example, TC Motor owns Viet Hung Industrial Park, where Skoda Auto plans to locate its production, and has all the necessary infrastructure to implement the carmaker’s investment plans.

Škoda dealership in Vietnam

Where will the business partner operate and what is distinctive about this locality?
TC Motor operates in Quang Ninh Province, where Viet Hung Industrial Park is located. This industrial estate is strategically located and has access to a well-developed motorway network, a large-capacity sea and river port and abundant road infrastructure.

What form will the cooperation take?
Local production of Škoda vehicles will take place under a production agreement. TC Motor will become the importer and distributor of Škoda vehicles under a global contract. It will represent the Škoda brand throughout the Vietnamese market, manage the development, standards and quality of the dealer network, and invest in building brand awareness and boosting the brand’s image. Another important part of the cooperation will be offering servicing and after-sales services to customers.

What will the dealer network look like?
The Škoda dealer network in Vietnam will be based on a pre-defined business model. It will be similar to the European model with independent dealers who have access to support, training and know-how from the carmaker. The aim is to rapidly expand the network and cover the needs of customers throughout Vietnam, gain a significant share of the Vietnamese market and become a leading brand in the automotive industry.

What are the investments involved?
Škoda and Škoda Volkswagen India Private Limited (ŠAVWIPL) are investing in the project in Vietnam, mainly in development and production. Other significant investments are due from local partner TC Motor.

Škoda Vietnam became a reality.

Who is the biggest competitor in the local market?
The biggest competitors on the Vietnamese market are Japanese and Korean car brands, which already have a strong position and a well-developed dealer network.

How many cars does Škoda plan to sell in Vietnam?
Škoda Auto expects annual sales of 30,000 cars in the medium term and deliveries are expected to rise to more than 40,000 cars after 2030.