Currently in Vietnam, all MG car brands sold are CBU units as the group does not have a manufacturing facility there at the moment. MG has had a presence in Vietnam since 2013. — Bernama photo
KUCHING: Analysts are positive on Tan Chong Motors Holdings Bhd’s (TCM) indirect wholly-owned subsidiary in Vietnam, Tan Chong Services Vietnam, being appointed by SAIC Motor as the exclusive importer and distributor of completely-built up (CBU) Morrison Garages (MG) brand vehicles.
This includes aftersales spare parts, and provider of after-sales services for MG vehicles in Vietnam.
AmInvestment Bank Bhd (AmInvestment Bank) yesterday noted that SAIC Motor is the largest automobile group in China, with affiliated OEMs including SAIC Maxus, SAIC Volkswagen, SAIC General Motors and the MG brand.
“According to our findings, SAIC has a market share of about 24 per cent with a total sales of 6.2 million vehicles in China in 2019, with Volkswagen being its best-selling brand,” it said.
“China registered a total industry volume (TIV) of 25.8 million of vehicles in 2019.
“Currently in Vietnam, all MG car brands sold are CBU units as the group does not have a manufacturing facility there at the moment. MG has had a presence in Vietnam since 2013.
“In 2019, MG sold a total of 270,000 units of vehicles in China. This translated into an insignificant market share of approximately one per cent of China’s total TIV, ranking them at 24th place in the region.”
AmInvestment Bank’s findings also showed that SAIC Motor has been aggressively trying to establish its presence in the Asia-Pacific region, including its recent expansions in Australia in 2018 and India in 2019.
Notably, the automotive industry in Vietnam is relatively small – with a total TIV of 322,300 vehicles in 2019. The top three major auto players in Vietnam are Toyota, Truong Hai (Thaco) and Honda with market shares of 25, 17 and 10 per cent respectively.
“We believe that it will take time for TCM to set up and establish a dealership base and we would only be able to see material impact in the near term,” the research house continued. “However, we deem this to be positive in the longer term as the group will have another brand to support the group’s earnings.”
In accordance to the Asean Free Trade Area (Afta) agreement, Vietnam has lowered the tariff on CBU imports to zero from 30 per cent. AmInvestment Bank said this has caused a significant increase of CBU sales in the country by a whopping 82.1 per cent year on year in 2019.
“With that, the price gap between imported and locally assembled vehicles has been narrowed. This has led to a slump in car prices where carmakers and dealers have simultaneously reduced car prices to compete for sales and market share.
“We believe that the exclusivity given to Tan Chong to distribute CBU MG vehicles and after-sales services for a new brand would enhance the group’s presence in the region. As all of MG vehicles would be imported, we think that the car models arrayed for the group in future would be a beneficiary of the Afta agreement.
“We are excited to see the model launches and how competitive it would be after seeing a shift in consumer behaviour towards CBU vehicles throughout the past year due to attractive pricings. Overall, we are positive on the announcement.
“As Tan Chong Vietnam will soon lose its rights to import and distribute Nissan vehicles (only CBU) and parts in the region on 30 September 2020, we also hope this agreement with SAIC Motors would be more than enough to mitigate the void about to be left by the Nissan CBU vehicles.
“Nevertheless, we think that it would take some time for the group to set up and establish a new dealership base in the region and we believe that there will not be any material impact to TCM’s FY20 earnings.”
On a side note, TCM has decided to utilise the one-month extension for the issuance of its 1QFY20 results by Bursa Malaysia, and will only be releasing its quarterly results in June 2020.