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Mechanical engineering companies fail to conquer US$300 billion home market

The Vietnamese mechanical engineering product market is estimated to have huge value of $300 billion, but local companies have only a small market share.

According to the Vietnam Association of Mechanical Industry (VAMI), there are many opportunities for enterprises in the industry in the time to come. The economy needs machines and equipment for industrial works such as thermal power, hydropower and wind power plants, chemicals, and mineral exploitation and processing. It also needs equipment and materials for high-speed railways, subways and the automobile industry.

In terms of wind power, Vietnam plans to have 70,000 MW of wind power by 2045 which promises jobs that bring revenue of $70 billion to mechanical engineering enterprises. The equipment that Vietnamese enterprises can make is propellers, wind columns and base systems. 

For every offshore wind power project, the base system alone will need 35-40 columns. So, this is a large market for the next five years. Also, Vietnam has been chosen by the US, Denmark and Norway to replace China as a place for manufacturing wind power equipment for regional markets. 

As for hydraulic power, according to Le Van An, President of Agrimeco, the world has been using irrigation reservoirs to generate electricity. Vietnam has a network of 11,000 reservoirs which only serve irrigation, which means that the reservoirs are being wasted. Agrimeco has been cooperating with Andritz (Austria) and Voith (Germany) on projects taking full advantage of water to generate electricity.

“We have conducted surveys in 37 cities and provinces and we are working on the first pipeline. If we succeed, the total capacity would be over 3,000 MW, which is even higher than Son La hydropower plant. This is also a huge market for the mechanical engineering industry,” An said.

The development of the automobile market is also giving great opportunities to the mechanical engineering industry. Domestic enterprises now can manufacture and assemble most cars, trucks and passenger vehicles, but the localization ratios remain low.

The demand for cars is growing and the Government vows to develop automobile industry as a pillar of Vietnam’s industry. It is expected that by 2030, the value of mechanical engineering products that serve the automobile industry would reach $130 billion.

Experts also can see great opportunities for Vietnam’s mechanical engineering enterprises when there is a relocation of the supply of mechanical processing production from other countries to ASEAN, including Vietnam. 


While the opportunities are great, experts said they are not sure if Vietnamese enterprises can grasp the opportunities.

VAMI pointed out that Vietnam’s mechanical engineering industry remains weak which still cannot satisfy requirements because of many problems, including the legal framework, the state’s management and the capabilities of enterprises. 

The mechanical engineering industry is witnessing far more imports over exports. Even in the home market, mechanical engineering enterprises lack orders. The investors of many large projects I  construction, transport, irrigation, oil and gas, shipbuilding, automobile and motorbikes mostly use foreign made products or products provided by foreign-invested enterprises in Vietnam.

In 2012, the Government approved a mechanical engineering industry development strategy. In 2018, the strategy was updated to make it adaptable to the new circumstances. However, the policies that concretize the strategies have not been formalized. Because of the lack of policies, mechanical engineering enterprises still find it difficult to exist, though the market is very promising.

Mechanical engineering firms have not received support from the State. They cannot obtain orders from public investment projects and from large projects. A high number of wind power projects have been approved, but Vietnamese mechanical engineering enterprises cannot participate in the projects.

Le Van Tuan, CEO of Lilama, affirmed that if the Government has good policies, mechanical engineering enterprises would be able to make products and provide services at a higher quality, competitive with products made by regional countries.

Nguyen Chi Sang, Deputy Chair of VAMI, said that the role of the Government in managing the development of the mechanical engineering industry is very important. With great market potential, enterprises will have many jobs and will be confident to take on large projects if there is a reasonable overall development strategy and policy.

Analysts said the State needs to apply specific policies for the industry. The domestic mechanical engineering industry needs to be protected in a reasonable way by technical barriers and regulations on product origin ratios.

The solutions include giving fair investment incentives that are equal for Vietnamese and foreign invested enterprises; and placing many orders for Vietnamese mechanical engineering enterprises, especially for public investment projects.

The enterprises need to be allowed to access bank loans at preferential interest rates. If they have to bear commercial interest rates like other industries, they will not be able to have 4.0 technologies.

Meanwhile, VAMI’s chair Dao Phan Long suggested that Vietnam should issue a law on mechanical engineering to encourage the development of the industry.

Tran Thuy


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