There are three different worlds in the automotive industry. One is formed by the developed markets, mostly rich countries where the population lives under good or very good living standards. Another one is China, a unique case of a fast-growing economy with its own peculiarities. And the third one includes all the developing economies that still need to go through a deep transformation.
The latter includes those countries where the industry is still growing and has a lot of potential, especially in the economies where the ownership of a car is a rare thing. India is a good example: a big population with very low purchase power where most of the people can’t afford a car. The car sales forecast for a country like this are usually optimistic and totally different from the stagnant volumes seen in Europe, USA or Japan.
The potential of these markets is the base for the foundation of new car brands. Companies like Vinfast or TOGG are two of the latest new entries that owe their existence to this bright future. They were created as a response to an increasing demand that was not truly satisfied by the existing makers. Their goal is to hit the global markets and catch a piece of them. Will they make it?
A tropical choice in the developed markets
Vinfast is a Vietnamese-origin car brand established in 2017 that makes part of Vingroup, the country’s largest conglomerate. It started operations after the construction of a plant in Hai Phong, a major industrial city in north Vietnam. Then in 2019, it delivered its first vehicles abroad and in late 2021, it delivered the first batch of fully electric cars in Vietnam.
The company has announced big plans for the global markets. They include selling its electric cars in North America and Europe, and also in Indonesia. So far, they have presented 10 different models of which 6 are electric.
The bet is quite big. We’re talking about an unknown maker that just started making cars less than 5 years ago. At home, the results are not bad. Vinfast was Vietnam’s seventh best-selling car brand in H1 2022 with more than 14,700 units.
However, it lost market share compared to H1 2021, falling from 10.6% to 7.3%. Toyota, the top-seller, sold 43,100 units and increased its market share from 18.3% to 21.2%.
TOGG, the pride of Turkey
Partly because it is becoming a regional power, and partly because it is an important car production hub, Turkey is now on the automotive radar. It needed its own brand and now it got it.
It is called TOGG, Türkiye'nin Otomobili Girişim Grubu A.Ş., and is the answer to Turkey’s necessity to electrify its market. It is perhaps the best part of TOGG’s story: it will bring the electric car to the Turkish consumers.
They have already presented two models, a C-segment saloon and a C-SUV, featuring a body design that was made by Pininfarina. The plan? To build 175,000 electric vehicles per year, with exports to the countries in the region.
Visionaries or dreamers?
The question now is whether these new brands will find customers far away from their home markets. It is always good to have more choices, and definitely the consumers in Vietnam and Turkey will now benefit from locally made cars.
The two brands have definitely a lot of potential there, especially if they bet on the electrification. The developing markets are still lagging behind in terms of the shift from ICE to EV. Any attempt to encourage the shift is more than welcome.
But in the mature markets the reality is more complex. Instead of growing, the sales of new cars are falling. There’s fewer room for the existing brands, and with the exception of Tesla, the latest new entries are still struggling to find a decent part of the market. Being in electric is not enough anymore. They must arrive with a new solution, or otherwise they will simply fail.
The author of the article, Felipe Munoz, is an Automotive Industry Specialist at JATO Dynamics.