Postcard From Vietnam
Matthews Asia
Taizo Ishida
October 29, 2010
I recently visited Vietnam, which was my first trip back there since 2006. During my long flight from San Francisco to Ho Chi Minh City, I vividly recalled my first impressions of Vietnam, especially the busy roads with constant streams of motorcycles. Particularly fascinating to me at the time was the sight of entire families all packed onto small single motorbikes, zipping along.
This time, after landing at Tan Son Nhat International Airport terminal (built in 2007), the motorcyclists I noticed during the taxi ride to my hotel were still abundant. But something was different. Gone were the trios and foursomes on motorbikes. I also noticed many more scooters among the ubiquitous manual-geared motorcycles, and even more surprising—riders were wearing helmets!
My immediate reaction: change can happen where you would least expect it. This surprised me simply because I have been accustomed to seeing change only gradually throughout this part of Asia, which is the emerging area of Southeast Asia (as opposed to rapidly changing China). In fact, the streets throughout the city looked generally more orderly and a certain element of chaos had diminished due to an improved emphasis on road safety; Vietnam began requiring helmets of riders of all motorized two-wheelers in late 2007 (otherwise motorbikes are subject to police seizure).
The increase in more attractive scooters was also impressive and reminded me a bit of Taipei traffic, where the majority of two-wheelers are scooters. Scooters are substantially more expensive than motorcycles because of their smoother ride and easier automatic shifting. They also seem better designed for urban commuting (think “Roman Holiday,” the classic Audrey Hepburn film). In fact, the scooter segment of Vietnam’s market has been growing quickly, and one high-end Italian scooter maker even opened its first plant in the country in June. Gone are the days when low-priced Chinese motorcycle manufacturers could swoop in and capture market share just by offering cheaper products. Vietnamese drivers now seem to be more attracted to quality than merely cost.
As much as two-thirds of Vietnam's GDP can be attributed to strong personal consumption in a country of 86 million (with an average age of 26). Over the past 20 years, it has shown impressive economic expansion, averaging 7.1% a year, which has pushed GDP per capita up to just over US$1,000. Research shows that US$1,000 GDP per capita is an inflection point of accelerating demand for motorcycles in emerging markets. Though Vietnam still faces potential problems with inflation, I feel encouraged to witness the real changes taking place in Vietnam’s consumer behavior.
Taizo Ishida
Portfolio Manager
Matthews International Capital Management, LLC
(c) Matthews Asia
