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COVID-19: Vietnam Automotive Industry
COVID-19: Vietnam Automotive Industry
May 2020
Agenda
01 Executive Summary
Human deaths as a result of particular diseases, after the year 2000 COVID-19 world GDP Impact is bigger
U-scenario
than 2008-09 (-1.7%) recession
SARS Swine Flu MERS Ebola COVID-19 Pre-COVID-19 Post-COVID-19
V-scenario
770 18k 850 11.3K 350k<
5% 137k
Germany
2% 184k
Spain
2002-03 2009-10 2012 2014-16 2019-Present L-scenario
2% 168k
Italy
24% 677k
USA
15% 82k
• Past crises have typically resulted
24 213 27 10 210 China in V-shaped recoveries
-5% 0% 5% 10%
• Given the shape and global nature of
Extent of spread globally, no. of countries this crisis a V shape is unlikely
Vietnam's GDP growth forecast (%) Top concerns of businesses during COVID-19
8 Fewer customers/ orders 67%
7.08 7.02
6.78 6.81 6.8 Loss of revenue 61%
7 6.68
6.24 6.21 Interruptions to the supply chain 40%
5.98 Temporary closure of operations 33%
6 5.42
5.25 Cash flow shortage 32%
Worker absense due to self-isolation or quarantine 32%
5
Difficulties in keeping & getting experts to Vietnam 27%
4.8
Worker absense due to international travel restrictions 23%
4
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020f 2021f None of the above 4%
Permanent closure of operations 3%
Dampener:
10% – 30% de-growth1 in H1 ’202 Deep Descent:
Pharma FMCG E-Commerce > 30% de-growth1 in H1 ’202
(Staples) (essentials)
Consumer
Dining Gems &
Durables &
Restaurants Jewellery
Electronics
●
Stability of the financial
Finance availability
system
Financial system likely to undergo stress ◑ ◕
New product launches OEMs to defer product launches later than Q3/Q4 ◕ ● ●
●
Vehicle discounts and
OEM initiatives
incentives
High discounts from OEMs ◑ ◕
●
Government and regulatory Tax cuts and other
interventions incentives
Government support expected to reduce impact of taxes and duties ◑ ◕
Consumer income Job losses and pay cuts expected ◔ ◑ ◕
Net worth Asset prices expected to decline ◔ ◑ ◕
Consumption demand Sentiment Consumer and business sentiment to remain low ◕ ● ●
Demand Side
• Preserve cash and create • Improve and sustain cash • Strengthen cash position • Golden Gate negotiating with
Managing
liquidity position through new to invest in new growth landlords to lower rent in line with
liquidity • Identify quick cash generation initiatives initiatives lost revenue (Source)
and saving opportunities
Workforce • Safeguard employee welfare • Manage employee • Re-organise to align with • The Coffee House implementing
engagement and • Communicate and engage productivity and adapt current business internal shipper program and
with employees operating model to new imperatives internal fundraising for employees
productivity ways of working • Create a resilient in need (Source)
organisation
• Assess supply chain • Evaluate supply chain gaps • Strengthen supply chain • Vietnam Airlines conducting
Supply chain disruption and monitor and and restore operations to resilience and visibility supplier re-negotiation (Source)
risk and manage risks support business objectives • Invest in agile supply • Samsung transporting electronic
resilience • Protect supplies, orders & chain components to its factories in
deliveries Vietnam by air (Source)
• Stress test IT infrastructure • Scale up IT resources to • Strengthen IT • Hanwa hosting online furniture
• Resolve issues impacting meet business requirement infrastructure and security fair using virtual reality to boost
IT readiness business continuity and develop scalability customer experience (Source)
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Historically, there have been three potential recovery scenarios after
economic shocks
FY 2020-21 FY 2021-22 Impact on Impact on
Q1 Q2 Q3 Q4 Q1 Q2 Private Spending Automotive Industry
• Rapid rebound in • Rebound in auto
1 household spending demand
Immediate expansion of • Cost pressures in the
Scenario 1: pent-up demand seen short term
Optimistic
COVID-19
outbreak Economy Auto sector
• Assess impact across core • Sense any significant impact on • Refocus business areas and
segments – mass vs premium, rural core segments segments under stress
Customer vs urban, private vs fleet • Identify new segments and • Protect and grow attractive business
Segments • Protect core segments and opportunities that are relatively segments
prioritise segments that are showing insulated
more resilience
• Evaluate any product delay costs • Review product launches basis • Shelve product launches that do
and revise target costs segment trends not meet the revised business
Products and • Assess launch readiness and identify • Prepare for digital and soft case
Launches opportunities to accelerate launches launches • Evaluate and invest in product
• Assess launch readiness and solutions that meet the evolving
ability to scale up new models customer needs
• Enhance promotional activities • Optimise sales channels for • Restructure sales channels to
across digital channels revised demand projections create more flexibility and
Channels • Enabling digital sales journey • Invest in convenient digital resilience
• Evaluate network strength and sales and marketing channels • Developed integrated digital
expansion plans channels to enhance visibility of
demand & customer needs
• Evaluate financial health of • Support suppliers and dealers • Explore opportunities for strategic
suppliers and dealers and develop with financial initiatives to investment in distressed partners
Ecosystem support initiatives ensure sustenance • Identify alternative sources and
• Evaluate opportunities to enhance • Review and enhance ecosystem channel partners in line with
resilience of ecosystem continuity plans revised strategy
• The impact of COVID 19 is likely to dampen the demand for new vehicles, with a serious decrease in new vehicle sales, with
Q1 recording 33% lower sales than last year
• Overall, market for four-wheelers are on the rise with an increasing number of buyers might choose to defer their new car
Temporary decline of purchase or shift towards pre-owned vehicles, for the following reasons:
four-wheeler market due
o Recently Vietnam's government announced that it is planning to issue a revision to Decree 116/2017 on the conditions for
to COVID -19 production, assembly, import and business of automobile warranty and maintenance services, removing a number of
regulations relevant to auto imports. This will allow for more efficient vehicle imports, which will further increase the
and supply of used vehicles and reduce the demand for new vehicles
increase in uptake of o Vietnamese wage growth may be beneficial to passenger vehicle (PVs) demand, especially when coupled with
used automobiles decreasing vehicle prices. A strong increase in real wages, in part driven by skills shortage, would support a continued
rise of Vietnam’s middle class. This will see the portion of the country's population who are able to afford vehicle increase,
but this growth will likely feed into the used vehicle market over the new vehicle market. This will limit growth in
new vehicle sales over our 2020-2029 forecast period, especially if the Vietnamese government continues to ease the
import barriers for vehicles
PwC 18
While navigating turbulence, cash is king!
Global 1 2
Foundation for cash
uncertainty may Cash visibility
generation initiatives
require robust 3 4
Debtors
• Proactive customer dispute management process
• Collection focused KPIs
Payables
• Increase invoice frequency
• Negotiate advance payment terms • Prioritise payments
• Ensure process compliance
• Realise discounts and rebates
• Renegotiate credit terms
• Consolidate supplier base
Inventory
• Align target stock levels with supply chain
• Identify alternate sources
PwC 24
What we were least
prepared for, has
become our new reality
and our “new normal”...
Ease of Implementation
• Focus: Keeping the lights on through Virtual capability
cost, compliance, care and Remote working enablement
building
and compliance
commitment
Phase 2 : Mid Term
• Timeframe: 2 months to 6 months Transition Cost and productivity
management
• Focus: Building the momentum and
nurturing the eco-system to adapt
Urgently rewire HR policies
to new ways of working
Business continuity
planning
Remote working enablement Business continuity planning Continuous communication Cost and productivity
and compliance • Global mobility and business
and connect • Workforce planning and
• Test and enable technologies to continuity with customers • Constant communication to management
support collaboration and • Leadership alignment for employees notifying about • Refine performance
communication business continuity measures taken amid COVID-19 expectations
• Remote working policy and • Workforce augmentation • Share knowledge from credible • Plan for increase in
data security compliance for key activities and tasks sources e.g. WHO absenteeism and work refusal
that need support • Creating a digital workplace • Senior executives,
• Scenario based crisis- of the future white collar and blue
preparedness audits collar productivity plans
Virtual capability building Transitions management Urgently ‘rewire’ HR policies Employee health and wellness
• Managing virtuality as a • Compliance and brand for relevance • Conduct health and wellness training
capability management around workforce • Realign Hiring, Onboarding,
• Revise leave, travel and
• Building leadership capability transitions Exits, C&B, PMS and L&D
hospitalization, and insurance
• Coaching and career transition policies to support the
for a virtual world • Manage employee morale through
support for impacted staff organisational strategy and the
• Coaching of leaders and staff care and communication
current scenario
for morale and resilience • Creation of scenario-based • Establishing employee
• Future focused capability workforce transition plans support services e.g.
building and dedicated hotline number
digital fitness
Accepting the ‘new normal’ Value stream management Workforce morale Productivity
• An otherwise ‘brick and mortar’ • Planning for ramping up will be • Employee costs should not • Productivity is going to be hugely
sector, the automotive industry different depending on whether exceed 10% of total costs for the governed by how productivity is
has shown tremendous the supplier is direct or indirect sector; yet the success defined in current circumstances
resilience to transition to dependence on employee
‘working from home’ • With regard to employee inclusivity is high • Value to be delivered as a
productivity, use the down time • productivity norm by each
• Slow returning to normal and to build newer partnerships and • Working with executives, white function and level will be critical
hence managing plans around avenues collar, blue collar, contractual to be defined and focused upon
that staff and unions to manage
scenarios for sustenance • Capture learnings
from COVID
Newer norms and Contributing to the ecosystem Preparing for the new customer The long-term bets
capability for the future • Produce an inclusive cash flow and employee expectations • Ring-fence your critical talent
• Managing virtuality as a and productivity management • Will the definition of ‘mobility’, and • Upskill your talent for the future:
capability and a way of life plan, that takes into social distancing change human people will have to run at double
consideration the success of the preferences?
• Building leadership capability the speed as normalcy comes in
entire value chain will be key
for a virtual world • Could workforce models across the • Focus on talent pipeline and
• Coaching of leaders and staff • Planning with ancillaries, entire value chain be shifted to engaging new talent
for morale and resilience suppliers and dealers and ‘core’ and non-core and build
distributors for ‘newer ways’ service providers for • Finally, work on new
• Future focused capability
and ‘newer propositions’ non-core segments processes for enablement
building and digital fitness and decision making
could be key across all players?
Impact of COVID-19 and Navigating the Turbulence
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And once the storm is over, you
won’t remember how you made
it through, how you managed to
survive. You won’t even be
sure, whether the storm is
really over. But one thing is
certain. When you come out of
the storm, you won’t be the
same person who walked in.
Haruki Murakami
Japanese writer
PwC 30
The crisis will continue to be very disruptive for supply chains…
Supplier Supply delays or Multiple and quick order changes, Decreasing demands and
Customers
cancellations cancellations unpredictable buying behavior
Demand
Demand / Order
Order Plan Order Order Automotive Electronics
Healthcare Construction
Production sites Central Local
distribution center (DC) distribution center (DC)
Supplier
businesses in Source Make Deliver Deliver Packaging Household
distress
Are you preparing for the up-swing? – “History shows that SC struggle most with the up-swing”
Impact of COVID-19 and Navigating the Turbulence
PwC 32
…while building the capability to propel future growth and competitive
advantage for many years to come…
Working Capital Enhanced Planning End-to-end Agile Sourcing and Stronger eCommerce
Management Capabilities Supply Chain Visibility Supplier Management Enablement
• Analysis tools to model how • Advanced modelling and • Deploy control towers that • Streamline and simplify the • Anticipate the increased
changes in supply chain analytics including demand aid in understanding raw sourcing processes to volume of eCommerce
activities affect inventory sensing material, inventory or sales reduce complexity fulfilment and scale up the
and working capital positions etc. supply chain capacity
• Real-time scenario analysis • Reducing product
• Robust inventory planning during planning sessions to • E2E supply chain complexity to reduce the • Build unified middle-tier
processes allow rapid evaluation of orchestration using the supplier the base where platforms to connect their
options internal data and external possible online channels with their
• KPIs should focus on data (e.g. goods in transit, offline operations
working capital, not supplier data etc.) • Digitization of the the
increasing capacity usage entire process will aid
or avoidance of lost sales increased agility and
responsiveness
Enabler
E2E data availability, utilization and analysis and efficient IT and data architecture as supply chain support
PwC 35
Information technology readiness and security
• Identify functions, and number of employees
and infrastructure
• Ensure secure practice awareness • Sufficient internet connectivity and bandwidth
Target WFH
• Contact details of IT and IS teams Workforce and Functions • 24/7 availability of crisis management team
• VPN coverage in the complete network
• Availability of a Central repository of Critical process
documentation IT and Security Tools • Laptops/mobiles/desktops A/V enabled VOIP
• Access management processes and policies for • Policy clarity on personal device usage and special attention
different time zones and shifts
IT and Cyber Security • Issue laptops and handheld devices to the extent possible
• Stringent security policies for internet Governance
• All data centres to be equipped with a live or hot network
• Robust and scalable security infrastructure
Hardware and Data
• Optimum mix of traditional and cloud-based solutions Centres • Adequate staffing of managed IT services partner
• Prioritise critical daily usage softwares
• Prioritise softwares with easy remote access and installation Software and
Licensing
• Ensure ISP and VPN solutions have both upstream and
• Awareness on possible modus operandi of cyber attacks downstream sufficient bandwidth
Bandwidth Sizing and Data
• Authorisation to resources based on relevance • Plan for peak-load scenarios
Backup
• Multifactor, adaptive and risk-based authentication
Cyber security
• Identity management solutions should be updated Considerations • Training workers with remote working nuances
• Disseminate guidance templates to make
Remote Working remote working self-explanatory
Ways
Do not lose sight • Pay attention to all of the risks, not only COVID-19 threats: focus on the virus alone could lead to neglect of other serious
of other risks problems.
New business opportunity Shared Increased online sales Concerns to Re-evaluate retail format and Door step service
mobility concerns can open up visit showroom will lead to online network Vehicles serviced and sanitised at
Front End increased 2W, PV & used vehicle digital sales and marketing Network footprint and showroom door step to bring in hygiene
sales and pay-per-use model processes (manpower & OH sizes revaluated considering dealer transparency; reduced service center
savings) viability footprint
Be decisive Focus on data: Build digital thread Build future ready SC* Mfg & Office space redesign
Supply Chain Consider financial viability for future across Ops. for faster decisions, Redesign supply base (on/off-shore, Reduced opex (e.g. lease, energy,
and decide on ops restructuring, lower human intervention, financial critical parts, alternative matl.) with supplies) considering optimised mfg.
leadership and investments on hold loss preemption, remote support real-time risk profiling (e.g. integrate (lower prodn.) / office space (remote
Operations blockchain) work)
Policy restructuring Contract restructuring Shared services & IT Multi-skilled workforce Convince
Restructure HR policies (e.g. health, Revisit labor union contracts (e.g. Savings through shared services need for multi-skilling and conduct
remote working, travel, visitors, pay, leaves, benefits) for shared (legal, tax, finance, admin) relevant training programs (e.g.
Workforce Build scalable IT backbone for online
immigration, leaves, pay) through risk impact ownership for coding)
crisis learning collaborative crisis mgmt. and remote needs
• Invest to build 3-6 differentiating Identify higher • Rationalise SKUs and programs Enable & • Define right portfolio mix of products
capabilities (e.g. technology, service value-added • Drive production and logistics sustain and services for future
levels, agile SC, low cost ) priorities for efficiencies • Ensure finance continuity
• Invest in startups to acquire investments • Amend vendor contracts for payment • Enhance innovation pipeline
futuristic capabilities (e.g. digital and pricing terms (e.g. large size ERP • Invest in special projects (e.g. brand
tools, blockchain, EV, ADAS) projects) positioning, process streamline and
• Co-create with peers for shared • Reduce supporting infrastructure and automation, lean)
investment in new technologies tools cost (e.g. mfg. assets) • Rationalise roles and resources
• Define PMO for execution
• Eliminate low value-add work
Enable change and cultural evolution
• Minimise management through spans and layers • Improve talent effectiveness through re-skilling and defined programs
• Improve consistency through standardisation • Optimise workload by redefining service levels and process change
• Model the complete supply chain, including • Identify risk areas basis PwC’s checklist, • Prioritise and define response actions aligned
Tier 1 and Tier 2 suppliers and disruption event and assess the to organisation’s risk appetite
service providers severity of risk
– Strategic
• Identify all potential risk elements, in the • Prioritise areas, define inputs of quantitative
context of supply chain objectives and and qualitative data – Operational
identify underlying drivers and indicators
• Model the Supply chain on PwC’s SCRM – Organisation
• Conduct workshop to align on supply chain tool and simulate risk types and scenarios
risks and their early warning indicators – War room management
• Assess the impact at each node of the supply
• Identify and specify the early warning chain through predictive analysis on product • Implement and monitor response actions
Indicators availability, revenue, cost and inventory leveraging war room dashboards
POINT OF DISRUPTION
Ship, rail
Foreign Production
Plants Dealers - Motorbike LT: 1 day
Vietnam End user -
Production capacity: Automobile LT: ~15 weeks
Vietnam
~ 2.8 mil units/ year
average delivery note:
8 units
Foreign Suppliers Lead time: ~45 days
Production Plant –
Northern Vietnam
Delivery Time: ~ 5 days Ship, rail
Market- Foreign
Dealers -
Foreign Demand based
Scheduled component delivery in of on forecast
Vietnamese predefined order size
Suppliers
For further information and insights, please feel free to get in touch with
PwC 43
Thank you
pwc.com/vn
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