A Manufacturing Hub For Asian Market
By Quoc Hung
The European leading scooter maker Piaggio has increased investment in Vietnam to meet domestic demand and supply for the growing Asian market. Expanding production capacity, establishing an R&D center and opening a scooter engine plant are the company’s concrete efforts to realize this ambition.
When Piaggio first entered Vietnam with the opening of its scooter plant in 2009, the local market had been dominated by Japanese motorcycles for years. However, the Italian scooter maker was firm in its commitment as the company had its own business strategy. It would create a new segment for the market with its premium scooters targeting high-income, discerning urban consumers asserting themselves with a style.
Piaggio has been faithful to the philosophy of providing beautiful scooters for consumers since the first Vespa was introduced into Vietnam in the 1950s. “We have our own niche. Vespa is a lifestyle product, meant for people who like to be distinctly known to possess something unique” said Costantino Sambuy, Piaggio Vietnam General Director and Executive Vice President for Asia two-wheel markets. With the first model produced in Vietnam, Piaggio aimed to introduce Vespa as an iconic style. The all-steel body brings the Vespa brand its legendary strength and sets this vehicle apart from other scooters.
After only three months of operation, Piaggio plant made a milestone with the production of 10,000 Vespa LXs. “This positive number shows that Vietnamese consumers warmly welcome the Italian Vespa made in Vietnam. It also heralds a good start for our business here,” said Sambuy.
This initial success has encouraged Piaggio to expand its market with efforts to diversify product range and enlarge the distribution network. The company has launched Piaggio models to penetrate different segments, such as Piaggio Liberty, Piaggio Zip and most recently Piaggio Fly. The latest model has been conceived over the past three years with an aim to create a new scooter for the global market.
Piaggio plant in Vietnam currently makes four models and runs at full capacity, with 140,000 units for the local and regional markets. All the models use innovative technology such as fuel injection, and meet the Euro III emission standard.
At present, the motorcycle market is in a lull due to impacts of the global economic woes, but Sambuy is still confident in Piaggio business in Vietnam. The local motorbike market has been growing steadily since the company officially started operation in 2009, with consumption of some three million bikes per year. “We have perceived a big change in consumer trend when more and more have shifted from the gear segment to the automatic segment,” Sambuy noted. This is a great opportunity for Piaggio which targets the premium scooter as its market niche.
A regional production hub
Piaggio is a leading European scooter maker, but its future business gears toward developing countries in Asia, as evidenced through the 2011 sales. While sales in Europe, the Middle East and Africa fell across the board, things were quite the reverse in Asia. This market posted strong growth, with 104,800 scooters sold in the year, up 75.9% from 2010, and sales reached 187.5 million euros, up 40.8%. Overall, sales growth in Asia in 2011 reached 55.1%, excluding the exchange rate fluctuation.
According to Piaggio, this strong growth reflects the success of the company’s business in Vietnam, where Piaggio’s first plant in Asia was built in 2009. Vietnam is the fourth largest motorbike market in the world after China, India and Indonesia. That is the reason why Piaggio decided to choose Vietnam as a regional production base and to move its headquarters from Singapore to the country in 2010. Initially, the plant in the northern province of Vinh Phuc was planned to produce Vespa scooters for the local market, but it has now made other models for export to emerging markets in Asia, such as Indonesia, Thailand, Taiwan and Malaysia.
As a result, Roberto Colaninno, Piaggio chairman and CEO, is very pleased with the business here and has decided to increase investment to turn Piaggio Vietnam into the company’s production hub in Asia. This strong commitment was marked with the opening of Piaggio’s engine manufacturing plant in Binh Xuyen Industrial Park in Vinh Phuc on March 1. The plant located next to Piaggio’s assembly plant will produce scooter engines with initial capacity of 200,000 units per year. The capacity will be raised to 300,000 engines when the scooter assembly plant expands production.
Piaggio has also set up an R&D center, its first in Asia, in Vinh Phuc. The center has cooperated closely with Piaggio’s headquarters in Pontedera, Italy, to develop engines and scooters for the Asia-Pacific market.
“The successes that Piaggio Vietnam has achieved since starting operation in Vietnam in 2009 have created a solid foundation for Piaggio’s expansion strategy in the Asia-Pacific. With its fast urbanization and growing consumption, this region is the focus for Piaggio’s growth in the coming years,” the Piaggio leader said at the opening of the engine plant last week.