Most of the Viet Nam Engine and Agricultural Machinery Corporation (VEAM)'s profits come from its joint ventures such as Honda Vietnam, Toyota Vietnam and Ford Vietnam which are leading in the field of motorcycle and automobile manufacturing in Vietnam. VEAM holds a 20-30 per cent stake in these joint ventures.
In 2018, Honda has continued to dominate the motorcycle market, bringing VEAM with huge benefits. In the first nine months of this year, Honda's after-tax profit grew 34 per cent over the same period last year.
Each year, these joint ventures bring VEAM about VND5 trillion ($215 million) in profit, of which Honda represents about 85 per cent.
Contrary to experts' opinion that the motorcycle market has become saturated, the wave of motorcycle-to-scooter conversion will help Honda maintain the growth rate of over 10 per cent after the first nine months.
The profit margin from scooter sales is significantly higher than that of motorcycles, boosting the company's profitability. Honda's market share has risen by 5 percent from 72 percent in 2017 to 77 percent in the third quarter of this year.
In addition to motorcycles, Honda's sales of new automobile generation are up 80 per cent year on year. The booming auto market in Vietnam in recent years has helped Honda's automobile sales rise sharply by 25 per cent a year.
In addition to Honda, two other joint ventures between VEAM and Toyota and between VEAM and Ford have shown signs of recovery as well. In the first half of 2018, automobile sales of Toyota and Ford decreased by 13 per cent and 33 per cent respectively over the same period last year due to negative impacts of Decree 116 on the import of complete build-up units (CBU).
After meeting the regulations specified in Decree 116 and having started to re-import automobiles since July 2018, third-quarter sales of Toyota and Ford rose by 15 per cent and 21 percent respectively over the previous quarter. Toyota’s recovery in the CBU import is likely to help the automaker improve its profitability in 2018, which has indirect impacts on that of VEAM.
Favourable business results have pushed up VEAM stock prices continuously despite the sharp drop in Vietnam stock market. In the recent three months, VEAM's share price has increased by 28 per cent.
VEAM is also targeted by investors in the wave of equitization of state-owned enterprises. Currently, the Ministry of Industry and Trade still owns an 88.47-per cent stake in VEAM and plans to sell a 52.75- per cent stake (equivalent to 700.9 million shares) in VEAM to reduce its shareholding to 36 per cent.