SYM Triumphs With Two-Wheelers in Vietnam

Sanyang Industry Co. has long been known in Taiwan as a major producer of powered two-wheelers (PTWs) and automobiles, and now it has become well known in Vietnam as well—as a manufacturer of PTWs and cement, and as a bank.

Sanyang ended its cooperation with Honda for the production of PTWs in Taiwan in 1995, when it introduced motor scooters bearing its own SYM brand. Its production of autos on the island in cooperation with the Japanese company came to an end in 2004, when the Taiwanese firm switched to South Korea's Hyundai Motor Co.



In Vietnam, Sanyang owns Vietnam Manufacturing and Export Processing Co. (VMEP), that nation's first 100% foreign-invested maker of PTWs. VMEP plans to turn out about 300,000 PTWs this year, improving on the 26% share of the market that it enjoyed in 2004.

The company started producing "cub" type light commercial PTWs in Vietnam in 1992, using semi-knock-down (SKD) parts imported from Taiwan. Last year it was the No. 2 PTW maker there (with sales volume of 270,000 units), trailing only Honda's joint-venture company, which had a market share of 50% in 2004.

Harrison Liu, director of Sanyang's overseas business office, explains VMEP's success by saying that "Sanyang gained a lot of know-how from its foreign partners, including learning about high quality and good management systems from the Japanese and an aggressive attitude from the South Koreans. Sanyang is combining this know-how with our own concepts and experience to pursue internationalization."



Liu says that through its long-term cooperation with Honda (the relationship lasted 40 years), Sanyang came to realize the importance of internationalization, research and development capability, and overseas markets. Today, Sanyang is casting its eyes on the global PTW market, which totals about 30 million units per year—of which Asia accounts for two-thirds.

Pinpointing the Best Locations

When it surveyed potential plant locations and markets in Asia more than 10 years ago, Sanyang pinpointed Vietnam and mainland China as the best areas. As a result, it set up VMEP in Vietnam and Xiashing Motorcycle Co. in Xiamen, Fujian Province, in 1992.

Two factories were built in Vietnam, one in the northern city of Hanoi and the other in the southern city of Ho Chi Minh. It took some time to overcome language and cultural differences, and to accumulate manufacturing and marketing experience there.

In 1996, problems surfaced with the handlebars and frames of VMEP's "cub" vehicles. Intensive study revealed that the problems resulted from differences between Taiwanese and Vietnamese riders in both riding habits and purpose of use. In Taiwan, the vehicles are normally used for transportation on level roads, while in Vietnam they are frequently used on rural and rough roads.



"Thanks to efforts to redesign and harden key parts," Liu recalls, "VMEP's PTW products immediately won back their market share and began a spiraling growth in sales in the following years." Sales soared from 80,000 units in 2000 to 160,000 units in 2001 and 240,000 units in 2002.

As the company has become more widely known, Liu says, "VMEP has also changed the ideas that consumers there have about PTWs. A few decades ago most of the Vietnamese lived in rural areas and knew PTWs by the name of ‘Honda,' since they knew only that Japanese brand. But now SYM is aggressively taking over market share from Honda. We've learned that VMEP should develop its business from the viewpoint of what customers there want, instead of concentrating on selling products developed by Taiwanese engineers."

One valuable lesson that VMEP learned early on was that some rubber parts could not withstand the hot climate and intense UV rays from the year-round blazing sun in Vietnam, and would become rigid, fragile, and whitened after about six months. To overcome that problem, Liu reports, "VMEP immediately went into cooperation with our rubber-parts suppliers in Vietnam and developed a new formula for our rubber material."

Training for Vietnam

The Vietnamese success is also due in part to the company's policy of offering training courses to Taiwanese staff. After being there for several years, the firm's Taiwanese employees can speak fluent Vietnamese and are able to communicate with distributors there directly, without needing translators. (Liu adds that VMEP has sent many of the Taiwanese personnel whom it has trained to serve with Sanyang's affiliated cement plant in Haiphong, which started producing in 1997.)

Despite its impressive achievements, Liu continues, "VMEP is not powerful enough to be proud; we know that our current share of the market is only a survival share." It takes 46% to be considered a stable share, he explains; 23.6% is a survival share, and 13% is an unstable share that makes a company vulnerable to being squeezed out of the market at any time.

"Vietnam has a good environment for foreign investors," Liu stresses, "with a number of advantages including stable politics, a strong consensus among national leaders and civil servants on the need for stronger development, a diligent labor force, workers with good abilities and a strong willingness to learn, abundant natural resources, friendly people, and investment incentives provided by the government. So we're confident about VMEP's future development."

The company has invested US$15 million in Vietnam, and is currently building a second PTW engine plant there which will boost its in-house production ratio to more than 70%. It will also help to assure, the director comments, that the quality of engines produced in Vietnam will be just as good as those produced in Taiwan.

The company has also decided to set up a Vietnamese R&D center, which will develop models for the Association of Southeast Asian Nations (ASEAN) market. Its present product line includes cub and scooter models with engine displacements of 100cc to 150cc. More models and more engine choices will be added to the output of the two plants, which now have a capacity of about 540,000 PTWs a year.

VMEP plans to develop gradually into Sanyang's PTW operations center for the ASEAN market, which has a sales volume of around 7.5 million units annually. The company is already actively engaged in developing the market in nearly Indonesia.