There are three different worlds in the automotive industry. One is made up of developed markets, mostly rich countries where the people live with a good or very good standard of living. Another is China, a unique case of a booming economy with its own quirks. And the third includes all developing economies that have not undergone major transformation.
In the latter case, these are countries where the industry is still growing and has great potential, especially in economies where car ownership is a rarity. India is a good example: a large population with very low purchasing power and most people can’t afford a car. Sales forecasts for regions like these are typically optimistic and completely different from the stagnant volume seen in Europe, the United States or Japan.
This market potential is the basis for the emergence of new car brands. Companies like VinFast and TOGG are two of the latest innovators who owe their existence to the prospect of a bright future. We are talking about brands created in response to the ever-increasing demand that is not being met by existing manufacturers. Their goal is to reach the global market and capture some of it. Will they succeed?
Tropical Choices In Developed Markets
VinFast is a Vietnamese automotive brand that was founded in 2017 and is part of the Vingroup, the country’s largest conglomerate. It started operations after the construction of a factory in Hai Phong, a large industrial city in northern Vietnam. Then, in 2019, it sold its first vehicle overseas and, in late 2021, delivered the first batch of fully electric cars to Vietnam.
The company has announced big plans for the global market. Among them are sales of electric cars in North America and Europe, as well as in Indonesia. So far, VinFast has presented 10 different models, 6 of which are electric.
The stakes are quite challenging. We are talking about an unknown manufacturer that started making cars less than five years ago. At home, the results are not bad. VinFast is the seventh best-selling car brand in Vietnam in the first half of 2022 with more than 14,700 units.
However, it lost market share compared to the same period in 2021, down from 10.6 percent to 7.3 percent. Toyota, the top seller, sold 43,100 units and increased its market share from 18.3 to 21.2 percent.
TOGG, the pride of Turkey
Partly because it became a regional powerhouse and partly because it is a major vehicle manufacturing hub, Turkey is now on the automotive radar. The state needs domestic builders and now, that’s a reality.
The name TOGG is an abbreviation of Türkiye’nin Otomobili Girişim Grubu A.Ş., and it is the answer to the country’s need for electrification. This is perhaps the best part of the TOGG story: it will bring electric cars to Turkish consumers.
Two models have been presented, the C-segment sedan and the C-SUV, with a body design made by Pininfarina. The plan is simple: Build 175,000 electric vehicles per year, with exports to countries in the region.
Visionary Or Dreamer?
The question now is whether these new brands will find customers far from their home markets. It is always good to have more choices and surely consumers in Vietnam and Turkey will benefit from locally made cars.
The two brands certainly have a lot of local potential, especially if the focus is on electrification. Emerging markets are still lagging behind when it comes to transitioning from ICE to EV. Any attempt to encourage the transition is more than welcome.
But in mature markets, the reality is more complex. Instead of growing, new car sales actually declined. There’s less room for existing brands and, with the exception of Tesla, the newest new kids in the kitchen are still struggling to find decent market share. Being electric is no longer enough. Whoever came in last had to propose a new solution, or else they would fail.
The author of the article, Felipe Munoz, is JATO dynamics Automotive Industry Specialist.