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Selling cars in a third world country

Posted in Posts, and Syllabus Schedule

I had an opportunity to work on the Ford Vietnam account when I interned for a U.S. public relations firm based in Hanoi 2 years ago. Although I mainly managed the media and branding side for my client, I also learned a lot about Ford Vietnam’s business model and especially, how hard it was for Ford to sell a car in my country.

During only 3 months of my summer in Hanoi, Ford was introducing the Ford Fiesta to Vietnam, opening 2 new showrooms, working on assembly line expansion and going through a tax scandal on imported parts. The new Fiesta was priced at $27,000 – a totally unaffordable price for 90% of Vietnamese people. Besides the majority of the population who farming determines incomes, an urban family in Hanoi or Saigon has an annual income of $6,000-$10,000 on average. We mainly use motorbikes for transportation.

How many cars are there in this picture?

Families that can afford to buy a car usually think of Japanese and Korean cars as their top choices. Ford is actually a high-end brand in Vietnam. Ford Escape 7-seats are greatly favored by tourism companies, which offer to give rides to a family on their vacations.

In addition to a low demanding market and competition against the Japanese, Ford (and other Western brands) also has to suffer from the complicated regulations.  Import the whole car into Vietnam and the government will tax you 200%. Car companies are required to assemble the cars inside Vietnam and allowed to import parts (but parts need to qualify a “small” and “separated” standard – this was the reason got Ford into trouble during my internship). And the roads inside metropolitan cities are not wide enough to accommodate cars, so on and so on.

The agency I interned for decided to brand the Fiesta as a lifestyle, fashionable car, targeting young and affluent working professionals age 25-35, who want to look trendy, modern and are also familiar with the concept of taking out a loan for the car. (We have a saving culture there and we pay for houses and cars upfront in the whole amount with cash). So the agency photoshot the new Fiesta with sexy models in bikinis and placed the pictures on fashion magazines. I don’t want to get into too much detail of what we did, but after 4 months since the Fiesta was introduced in Vietnam, sales reached 1,000 cars. We believed it was a great success.

It is tough to sell cars in third world countries. Toyota last year announced a plan to roll out a number of new compact cars priced around $12,500 in developing nations. Meanwhile, the U.S. is also trying to dump used cars to poor countries. If you want to know more about how hard it is to get into a developing market, try reading the book American Wheels, Chinese Roads by Michael Dunne. Prof. Smitka assigned my class last term to read this book to learn how GM set foot in China. Though time has changed and China is different from other developing countries, it’s a good book to read and see why third world countries are both an attraction and challenge to foreign car makers.


  1. Vietnam is typical of the ISI (import substitution industrialization) strategy of a high tariff wall around finished goods and lower tariffs on parts. With a 200% tariff (which thus triples the price), it’s quite profitable to import “kits” at a lower tariff rate and then assemble them, even at very low (and hence inefficient) volumes. In countries that follow the ISI strategy you also get lots of entry, I’m willing to be that everyone in the global industry is present. The only country to step away from that policy in ASEAN is Thailand – and Thailand is the only country with an efficient industry that exports a substantial part of its output.

    April 23, 2013
  2. asher

    interesting that the US has similar policies in place (though much less prohibitive towards import)

    April 23, 2013
  3. gjeong

    It is very interesting to see that the price Ford put for the new Fiesta was $27,000. Not that many people can afford this car without any financing. From this case, an interesting question comes up. Did Ford really investigate the Vietnamese car market? Did Ford consider the average income? I am sure that Ford did all the necessary research for living conditions in Vietnam, and yet, still chose to price it at $27,000. From this, we can conclude that Ford wanted to make their cars a luxury brand in Vietnam.

    May 2, 2013
  4. andrew

    A luxury brand? I think in the case of Ford in Vietnam they have no profit margin. It may be true that they did not do research towards their economy, but I feel that is unlikely. Most logically the $27,000 price point is their because they can not afford to make the car any cheeper or be forced to take a loss on each automobile sold.

    May 16, 2013
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