VietNamNet Bridge - Vietnam, a large market with high population and a developing economy, which is part of the vast 600 million people AEC (ASEAN Economic Community) market, is a ‘promising land’ for Russian automobile manufacturers.

Russian Prime Minister Medvedev, during his visit to Vietnam in early 2015, said Russia had great interest in an automobile assembling project in Vietnam, emphasizing that this would be one of the 17 priority investment projects between Russia and Vietnam.

One year later, on March 21, 2016, Vietnam and Russia signed the protocol on cooperation in the automobile industry, under which Russian automobile manufacturers would team up with Vietnamese partners to establish joint ventures to produce vehicles for domestic consumption and export to the ASEAN market.

The Russian side committed a 25-35 percent localization ratio by 2020 and higher proportions for the following years. If the promised ratio cannot be obtained, the joint ventures would have licenses revoked after 10 years of operation.

Also under the protocol, in the first three years, commencing from 2016, Russia would export 2,550 vehicles and 13,500 components to Vietnam. In 2016 alone, 800 Russian duty-free vehicles would arrive in Vietnam.

In the first three years, commencing from 2016, Russia would export 2,550 vehicles and 13,500 components to Vietnam. In 2016 alone, 800 Russian duty-free vehicles would arrive in Vietnam.

The tentative plan, in the eyes of analysts, shows the Russian attempt to quickly penetrate the Vietnamese market. 

However, Russia does not intend to export sedans or assemble cars in Vietnam, but trucks, terrain models and some other kinds of specialized vehicles. 

Russian automobile manufacturers understand they would not be able to compete with brands from the US, Europe, South Korea and Japan. Meanwhile, under the free trade agreements, Vietnam will have to cut the import tariff for complete built units (CBUs) to zero percent.

In fact, Russian Lada and Volga brands are very familiar to Vietnamese. However, this fame cannot ensure sales of Lada and Volga products in Vietnam now.

Vietnamese once used Volga and Lada cars tens of years ago, but they have turned their back to products as they now can afford more expensive Japanese, German and US cars.

An analyst commented that Russian sedan brands are only well known by Vietnamese of middle age or older, who don’t intend to buy cars. Young people aren't familiar with Russian cars.

However, the future would be bright for Russian trucks and specialized vehicles.

In Russia, UAZ terrain vehicles have selling prices at between 609,000 and 809,000 rubles, or VND200-276 million. If they come to Vietnam, the selling prices would be about VND300 million as they are free of tax. This will be competitive prices which allow Russian vehicles to sell well in the domestic market.

Tran Thuy