The machinery and equipment industry in Vietnam has experienced significant growth, leading to a positive impact on the country’s GDP and related sectors. GMA will provide a detailed analysis of this industry, highlighting key trends and investment opportunities for foreign investors as Vietnam develops its thriving economy.
I. FOREIGN SUPPLIERS DOMINATE THE MARKET
According to data from the General Department of Customs, from the beginning of the year until mid-March 2023, Vietnam has imported approximately 7.34 billion USD worth of machinery, equipment, tools, and spare parts. In 2022, the total import value of this group of goods reached 45.1 billion USD. These are the second largest imported goods in terms of value, following only computers, electronics, and components.
Many businesses in Vietnam have stated that the majority of machinery and equipment, especially those used for producing technically advanced and precise products, have to be imported from foreign countries because the quality of domestic products and machinery does not meet the demand. Some businesses even share that almost 100% of their products, from screws to machinery, have to be imported, and some equipment costs millions of dollars. However, businesses still have to invest with the expectation that these products can meet the requirements and join the production chain of foreign-invested enterprises and the global supply chain.
Vietnamese businesses are facing a shortage of machinery and equipment to meet certification standards related to supply chains and raw materials. So far, Vietnam still needs a complete machinery and equipment manufacturing company, so businesses have to use imported used machines.
Foreign partners, when importing products from Vietnamese businesses, always require them to have factories with machinery and equipment that meet the standards and competitive prices. Therefore, businesses have to make efforts to invest in and import machinery from Japan, and the United States and train personnel to use the machinery, despite facing many difficulties and challenges in terms of finance and resources.
II. MAJOR INDUSTRIES ARE IN URGENT NEED OF IMPORTED MACHINERY
1. Agricultural Machinery
Throughout history, Agriculture has played a significant role in Vietnam’s economy, contributing 12.4 percent to the country’s GDP in 2021. However, approximately 30 percent of farms in Vietnam still operate without mechanization.
In recent years, there has been a noticeable shift in the agricultural sector, with small-scale farms consolidating into larger, more centralized businesses that prioritize mechanization and automation. This transformation is driven by factors such as population growth, urbanization, the need for increased productivity, and the shrinking availability of agricultural land. As a result, the demand for agricultural machinery is expected to experience substantial growth in the coming years.
However, Vietnam just can only meet 30 to 40 percent of its agricultural machinery needs domestically, relying heavily on imports, particularly from China and Japan. However, the domestic agricultural machinery manufacturing sector is rapidly expanding, partially bridging the gap between domestic supply and market demand.
In addition to manufacturing and distributing machinery within Vietnam, there are emerging opportunities for foreign machinery brands to engage in technology transfer with local companies and offer custom hiring services in densely cultivated regions. These opportunities allow foreign brands to collaborate with local businesses and cater to the specific needs of the agricultural industry in Vietnam.
2. Industrial Machinery
Vietnam has recently emerged as a prominent choice for businesses looking to diversify their supply chains by establishing manufacturing operations in the country.
In 2020, the manufacturing sector in Vietnam witnessed significant growth, with approximately 110,000 firms, marking a 2.5-fold increase compared to 2010. The net revenue generated by these manufacturing industries rose from US$100 million in 2010 to nearly US$450 million in 2019.
The continuous influx of new international businesses entering the market has led to a surge in the demand for industrial machinery, particularly in sectors such as food processing, pharmaceuticals, plastics, and chemicals.
However, despite the growth in the domestic manufacturing sector, the supply of significant machinery, especially those that are high-tech and intricate, still relies heavily on imports. Therefore, it is a golden opportunity for exported machinery to penetrate the Vietnam market
3. Construction Machinery
As of 2020, there were more than 91,000 contractors actively operating in Vietnam, with approximately half of them specializing in residential construction. However, Vietnam lacks advanced manufacturing capabilities for construction equipment, leading to a heavy reliance on imported machinery.
Vietnam mainly imports machines from Japan, China, and the US with well-known brands like Komatsu (Japan), Hitachi (Japan), Kobelco (Japan), Doosan (Korea), Hyundai (South Korea), Daewoo (South Korea), and Caterpillar (US).
III. TWO MAIN WAYS TO ENTER VIETNAM MARKET
Foreign investors have the opportunity to set up fully-owned companies with complete ownership (100%) in the machinery and equipment manufacturing and trading sectors.
Nevertheless, opting to establish a subsidiary within Vietnam or partnering with a local entity, either through a distributorship or an original equipment manufacturer (OEM) arrangement, are commonly chosen strategies for multinational machinery brands.
1. Set Up A Legal Representative
Foreign machinery companies that are contemplating the establishment of manufacturing and trading operations in Vietnam, for both local production and distribution as well as exports to other markets, must carefully assess the significant investment required and the feasibility of establishing a stable supply chain for their Vietnamese factory. Despite the rapid growth of Vietnam’s mechanical engineering sector, only a limited number of manufacturers have the capability to produce products that meet international quality standards.
For investors facing budgetary limitations or experiencing challenges in finding reliable local suppliers for parts and components, establishing a trading company to import and distribute machinery from the parent company can be a viable option. Furthermore, employing a local team under the supervision of the parent company has proven to be effective in terms of branding and managing the dealer network.
2. Find A Local Distributor
Foreign companies with limited investment budgets and an interest in testing the market may opt to collaborate with local partners such as machinery distributors, and dealers. Even without a physical presence in the target market, partnering with a local firm can be a cost-effective market entry strategy.
Working with authorized distributors who have local market expertise and a valuable network of dealers and users is advantageous. This collaboration enables new businesses to reach potential clients more efficiently and in a shorter time frame.
Regardless of the chosen market entry strategy, foreign brands should prioritize the development of a well-established dealership network. These dealers play a crucial role in enhancing brand awareness and providing a comprehensive sales and service network to support the products.
IV. HOW TO FIND DISTRIBUTORS FOR YOUR MACHINERY PRODUCTS?
You have the chance to enter a market that has great growth potential and shows no signs of slowing down soon. To successfully expand your business in Vietnam, there are several steps you need to take, and simply copying your existing model may not be sufficient.
Here are some suggestions for finding a suitable distributor in the market:
1. Create A Well-established Website
- Localization: Ensure that your website is fully translated into Vietnamese, including all product descriptions, specifications, and other relevant content. This shows your commitment to the Vietnamese market and makes it easier for potential distributors to understand your machinery products.
- Clear Product Categories: Organize your machinery products into clear and intuitive categories on your website. This makes it easier for distributors to navigate and find the specific types of machinery they are interested in. Provide detailed descriptions, technical specifications, and high-quality images for each product.
- Contact & Inquiry Process: Clearly display contact information and a user-friendly inquiry form on your website. Make it easy for potential distributors to reach out to you with questions, inquiries, or partnership requests. Respond promptly to inquiries and provide detailed information to help them make informed decisions.
- SEO Optimization: Optimize your website for Vietnamese search engines by conducting keyword research in Vietnamese related to machinery products. Incorporate these keywords naturally into your website content, including product descriptions, headings, and meta tags. This improves the visibility of your website in search engine results, making it easier for distributors to find you.
2. Utilize Linkedin & Other Social Media Platforms
Finding suitable distributors in Vietnam to partner with can be effectively accomplished through the use of LinkedIn, a professional and business-oriented social media platform.
LinkedIn provides various tools and options that allow you to identify professionals and the companies they represent. By reaching out to them through LinkedIn messages, you can explore potential partnership opportunities.
To maximize your success on LinkedIn for this purpose, it is advantageous to have knowledge about the specific companies and individuals you are seeking. By utilizing the other strategies mentioned in this list, LinkedIn can serve as an alternative method to directly connect with these businesses and their decision-makers.
Although LinkedIn is highly beneficial for discovering business partners across diverse industries, it is important to note that it is not the only platform available. Business partners can also be found through other social media channels. It is crucial to recognize that each business uses different channels based on its unique requirements.
For instance, it is unlikely that you will find business partners through a company’s Facebook Page dedicated solely to customer support. However, social media platforms offer groups and forums where like-minded individuals gather, making them potential sources for discovering future partners.
Conducting thorough research will help you identify the platforms and online communities that are commonly used within your industry.
3. Online Events Is Also A Solution
In 2020, numerous conventional events have transitioned to online platforms. It is crucial to identify the specific events that are relevant to your needs as they serve as vital avenues for discovering new partnerships within these virtual networks.
- Virtual Trade Shows and Exhibitions: Many trade shows and exhibitions in Vietnam have transitioned to virtual formats, allowing participants to showcase machinery products, connect with industry professionals, and explore business opportunities. These virtual events typically feature virtual booths, product demonstrations, live chats, webinars, and networking sessions. Attendees can interact with exhibitors, schedule meetings, and gather information about machinery products and services.
- Webinars & Online Conferences: Industry-specific webinars and conferences focus on various topics related to machineries, such as new technologies, market trends, industry challenges, and best practices. These online events feature presentations from industry experts, panel discussions, and Q&A sessions. Participating in webinars and online conferences enables you to gain insights, expand your knowledge, and connect with professionals and potential partners in the machinery field.
- Online Networking Events: Virtual networking events are designed to facilitate connections and collaboration among professionals in the machinery industry. These events often include virtual speed networking sessions, breakout rooms, and interactive activities. They provide a platform to engage with like-minded individuals, exchange ideas, and explore potential partnerships or collaborations.
Engaging actively and taking part in online events allows you to connect with multiple Vietnamese partners simultaneously, thereby enhancing the visibility of both you and your business.
4. Use Online Ads To Your Advantage
Depending on your target audience and their online behavior, various advertising solutions can be employed to effectively reach them such as Google Ads, Facebook Ads, and LinkedIn Ads. They help you reach a much wider range of audience in a short time.
The ad copy and visuals need to look professional and catchy. They should always have a call-to-action of leaving your information for further discussion so that you can collect potential leads to approach later on.
Additionally, ensure you have appropriate web analytics tools, such as Google Analytics and Facebook Pixel, installed on your landing page to track the performance of these campaigns.
V. IN CONCLUSION
To summarize, successfully selling machinery products to Vietnamese distributors necessitates a knowledgeable and customized approach that considers market preferences and regulations. Staying informed about market trends, adhering to import regulations, and providing ongoing support to importers are essential. With commitment and a strategic mindset, foreign companies can flourish in the Vietnamese market and take advantage of the growing demand for machinery products. By following the recommended steps and continually adapting to the market, businesses can unlock Vietnam’s potential as a profitable and sustainable market for their machinery products.
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