Socialist Republic of Vietnam

Socialist Republic of VietnamSurvey on Electronic Motorcycle Business

(Cooperation with SME)Report

March 2013

Japan International Cooperation Agency (JICA)

Terra Motor CorporationQuantum Leaps Corporation

OS

JR

13-018

1

Contents

０. Executive Summary (P.2-3)

１． Introduction (P.4-7)

１．１ Background (P.4-6)

１．２ Purpose (P.6-7)

２． Motorcycle And Electric Bike Market (P.8-30)

２．１ Motorcycle Market (P.8-25)

２．２ Electric Bike Market (P.25-30)

３． Customer Trend (P.31-33)

４． Law・Regulation (P.34-37)

４．１ Law/Regulation for the company and product their business is manufacturing

electric bike (including motorcycle) (P.34-36)

４．２ Law/Regulation for selling electric bike (P.36)

４．３ Law/Regulation for promotion and commercial advertisement (P.36-37)

４．４ Other regulation (P.37)

5． Final Summary (P.38)

2

０. Executive Summary

In the booming Vietnam, motorcycles are still used so often. The Vietnam motorcycle

market is 3 million sales yearly and the penetration ration is one third. Terra Motors

got the No.1 market share in Japan. We have a plan to provide our new electric bike in

the Vietnam market with our professional manufacturing and service quality that we

experienced in the Japanese severe market.

We investigate the electric bike market, the insight of the customer, and motorcycle

market from the macro perspective. As a result, we formulate a market entry strategy.

Then, we report the business model which is from the production schedule to the after

service on the figure bases.

Firstly, We state how attractive the Vietnam market is. We predict that the Vietnam

market is absolutely attractive due to the population growth, young population

composition and disposable income increase in the urban era even though the economy is

recently depressing. It is expected that the Vietnam population will exceed 100 million

in 10 years so we can say that the Vietnam market will grow like the equal market as Japan.

Secondly, here are the report of the motorcycle and electric bike market situations.

Repeatedly, the Vietnam marker is over the 3 million sales yearly and motorcycles are

common transportations. In 2012, the number of the motorcycle sales decreased until 2.8

million sales due to the economic depression but it is anticipated that the growth rate

of the motorcycles will keep 5％ because of the economic recovery and automotive taxes.

YAMAHA and HONDA are so strong in Vietnam that they get 80 ％ market share. They develop

the strong marketing strategy to build the brand image such as 'Fashionable' and 'Sporty'.

We differentiate from the motorcycle from 'Performance', 'Cost efficiency' and

'Innovative design' On the other hand, the electric bike market is not developed and the

perception of the electric bike is negative due to the Chinese imported bad quality

electric bike. We can create the new market as the authentic innovative electric bike

even though this situation.

We establish the 100％ Terra Motors Japan capital subsidiary in Vietnam. We have some

resident officers and send some managers from Japan to develop the market in the

foundations time. We will fund from the Japanese headquarters office to expand the

3

business in Vietnam.

Firstly, We develop our own showroom and focus on the marketing strategy to build the

Terra Motors brand as high brand. We closely evaluate the sales partner and choose the

sophisticated partner to build the hinge brand image. Moreover, we improve the after

service network to provide the reliable maintenance service for our customers.

4

1. Introduction

1.1 Background

Vietnam is hugely attractive market from the macro perspective since they have a stead

population growth, a moderate GDP growth and an urbanization promotion. A population in

Vietnam is 87.84 million people in 2011 and record the 1 million increase yearly.

Graph1 A Population in Vietnam

Source: Vietnam General Statistics Office

Graph2 Consumer Consumption Trend

Source: Vietnam General Statistics Office

With the population growth, a consumer confidence also grows(13.1％ increase yearly)

79.580.4

81.482.3

83.384.2

85.186.0

86.987.8

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Population in Vietnam（million・people）

25.0 28.7 32.5 36.9

42.3 49.9

65.8 65.2 75.8

86.2

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Consumer Consumption Trend（Billion USD）

5

and make the 1,000 billion in the retail market approximately. In 2012, GDP is single-digit

growth due to the monetary shock and the fiscal restraint caused by the false financial

statement submission of the national company. However, it keeps the average 24.4％ by

2011.

Graph3 GDP per person in Vietnam

Source: Vietnam General Statistics Office

Graph4 Trend of GDP in Vietnam

Source: Vietnam General Statistics Office

From 2002 to 2011, GDP growth is average 13.2％ yearly. In 2010, it exceeds the 100

billion USD and 121.7 billion USD in 2011. In the past two decades of the GDP growth,

Vietnam grows by an advantage of 7.2％ per year after China in the Asia and it shows how

440 492 553642

730843

1,052 1,064 1,169

1,375

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

GDP per peson in Vietnam(USD)

35.1 39.6 45.452.9

60.970.4

89.5 89.6103.7

121.7

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

ＧＤＰ（Billion USD）

6

Vietnam economy is powerful. Moreover, Vietnam economy is more than the one from the

publish data since the overseas Vietnamese send a huge amounts of remittance.

In 2012,there is a small decrease in the motorcycle market due to the economic depression

however the market is about 3.2 million units per year which is so huge comparing with

the one in Japan (0.3 million units per year). As a result, the penetration of the

motorcycle is about one third. Taking the Vietnamese average age which is late 20s into

consideration, most of the adult own the motorcycle as a daily usage. It is expected that

the motorcycle market expand more due to the increase of the middle class and the progress

of urbanization. Comparing with the Asian countries, there is an escalation tendency for

the motorcycle market in Vietnam since there is some regulations policy for the automotive

as a solution of the traffic jam.

On the other hand, there is also air pollution problem besides the traffic problem,

so the electric bike is valuable for the CSR and government usage. It is quit low

possibility for the Japanese motorcycle manufacturing to go into the electric bike market

because of their business model. So we are quite sure that we absolutely can solve the

air pollution problem in Vietnam with our Japanese quality electric bike. Also, we can

expand our business if we success in the South East Asian motorcycle market. That is why

we decided to go into the South East Asian market.

１.２ Purpose

Our company operates in Japan. We got No1 market share in Japan with our sales

capabilities and brilliant product only 2 years after it was founded. However, the

Japanese motorcycle market is rapidly shrinking and we cannot see the good future for

this market. But there are still a lot of opportunities in the booming South East Asia

and it is absolutely imperative for us to go into the South East Asia market. We would

like to be a successful case study as a Japanese start up company which goes into Asia

market. It is quite valuable for Japan to contribute to the further development of South

East Asia with the technology and service which are Japanese company strength. We have

three benefits for Vietnam mainly.

・Environment improvement

The exhaust gas causes the terrible air pollution problem especially in the urban era.

7

Recently the number of the motorcycle is increasing because of the urbanization. Most

of the motorcycle drivers put the mask on and keep the exhaust gas away. Our product solves

this situation.

・Job creation

Our business is not only to sell the product wholesale but also to manufacture and open

the show room. Regarding the manufacturing, we can commit to the development of the export

industry and job creation since we will sell the product in Vietnam as well as do near

Vietnam. Also, we transfer the technology knowledge and Japanese service way to Vietnamese

workers.

・New value proposition

Our electric bike connects the smart phone which is getting popular in Vietnam right

now. Our applications platform is open to develop. For instance, we are now thinking to

develop the new applications which people can upload the location information at the urban

era which is still not developed. Moreover, we can provide the new communication way for

the young people community and beneficial information for the local government through

our mobility.

２． M

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HONDA, ther

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motorcycle

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share in the

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e are twent

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8

ket

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ike in the m

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t HONDA and

compared to a

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e by transpo

convenient.

jam is get

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n. According

ty five mil

2009 and t

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Vietnam, ge

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another Sout

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in Vietnam

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10

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third share

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ed by maker

acturing res

eled vehicle

ket , HONDA

get 84 ％ s

ve very adv

tnam called

e because SYM

and service

r (2010)

acturing res

otorcycle m

r (2010)

search inst

e industry

has 55％, Y

share in se

vantages. In

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2011"

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11

"Asia two-wheeled vehicle industry 2011"

From viewpoint of market, motorcycle price is usually about from 1,000 to USD1,500 (e.x.

HONDA wave series: USD1,000～1,250, YAMAHA Sirius: USD 1,050 etc. On the other hand, HONDA

SH series: USD 3,000～5,000 and Spacy: USD 2,800, Piaggio USD 3,200 etc. Motorcycles of

high price are selled constantly.) Estimated market size in every price is below.

Table1 Market share according to price range (2011)

Source：Terra Motors

According to the research by W＆S market research company, people who is living in HCMC

on the web in 2011 , motorcycle types which are ridden the most in HCMC is Wave of HONDA

( 1,607 out of answer 5,441). the second types is Super Dream of HONDA (431), and the

third is Sirius of YAMAHA (374). On the other hand, if we total motorcycle market share

of high price (USD3,000) , there are more than 3％ and if we total motorcycle market share

of USD 2,500, there are more than 5％. The market size is not small.

Market size estimation (000 units) Actual Actual Actual Actual Actual Actual Estimation Estimation Estimation Estimation2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Market Growth %　（Per price zone） 37% 6% 20% 10% 20% -10% 5% 5% 5%Over 5000 USD 1% 14 19 20 24 27 32 29 30 32 333000 USD～5000USD 4% 56 77 81 97 107 128 115 121 127 1332000UDS～3000USD 30% 421 577 610 731 801 960 864 907 953 1,0001000USD～2000USD 65% 912 1,250 1,321 1,583 1,736 2,080 1,872 1,966 2,064 2,1671000　USD 0% 0 0 0 0 0 0 0 0 0 0TTL Market 1,403 1,923 2,032 2,436 2,670 3,200 2,880 3,024 3,175 3,334

And

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A or YAMAHA

ular model a

ndition of b

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nly need mot

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t also the m

ntation mod

y. Moreover,

A, either.

12

and price r

brands about

eople, fuel

torcycle da

of HONDA is

res of Viet

merit of th

el of Piagg

, the fuel c

ange (all t

Source：W

t fuel effi

efficiency

ily. All ma

s far famous

nam can be

is fuel cons

gio which is

consumption

the 5,441 un

W&S 社 Moto

ciency whic

is one of th

akers focus

s for good f

said to be

sumption. On

in the hig

of SYM of t

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related wit

n the other

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torcycle ba

and servic

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fuel consum

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asis of sele

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on (eco and

d as followi

hing to ele

mption.

13

consumption

ection serv

ntioned abov

cost effect

ing in the m

ectric bikes

n of each b

ves as price

ve in the con

tiveness) an

market. We a

s not only w

rand

Sourc

e, brand, fu

nsumer behav

nd price (hi

are sure tha

with a desi

ce: Terra M

uel consump

vior forecas

gh added va

at we can so

gn or a fun

Motors

ption,

sting.

alue),

olicit

nction

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d like to s

se motorcyc

sent, there

h10 Posit

summarize th

le makers, s

was time on

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14

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he past tre

such as HOND

n which the

t share of H

of each com

end of the J

A and YAMAHA

share was d

HONDA in V

mpany

Sourc

Japanese mot

A, had estab

dropped gre

Vietnam

ce：Terra M

torcycle ma

blished the

atly tempor

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akers.

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rarily

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from

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by th

expen

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time.

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and s

their

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YAMAH

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appea

YAMAH

NDA has the

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a. Referring

he Institute

nsive and or

rcycle was a

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HONDA ana

result, th

iculty to ha

service in th

r brand call

ietnam is t

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th HONDA and

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lyzed the C

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15

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n Asia –gene

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ss than half

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as large ret

oned above.

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Since SYM is

nd we can se

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the place o

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eral data a

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t of the ch

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dn’t realiz

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turn. Even n

series, Wave

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shops very

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level aroun

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nd company

of HONDA was

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products at

t share rap

at the cost

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HONDA establ

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t cut.

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uality

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as HO

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s soliciting

e brand is v

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er company.

each company

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the sale in

But Piaggi

y manages se

16

YAMAHA.

ure３ HONDA

re４ YAMAH

gh Piaggio w

A brand ca

f the yearni

Usually, alt

use the lo

o signed th

everal 10 s

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which is dev

lled especi

ng of the V

though Japan

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he exclusiv

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ally Vespa

ietnamese. P

nese motorcy

y which hold

ve contract

Piaggio had

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s surmised t

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of the Inter

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considering

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SYM has drop

brand. Adve

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of ad indus

there is st

actual measu

local place

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an event on

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st several y

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on of number

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the number

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e makers in

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ill little

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especially

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the street

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e is no shop

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ion and con

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Vietnam. Th

reliability

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tivities of

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at especial

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ffectiveness

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e are two m

5 Motor Cy

ough there a

ness develop

s as importa

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vestigated

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trol number

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hey are HONDA

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these days,

each compa

s TV, newspa

ly the adve

measurement

formed plus

ning and nig

s has a very

ry prosperou

ain content

cle Show

are no signs

pment speed

nt as it said

ir houses be

and we can v

r YAMAHA is

of shops f

tuation. As

A, YAMAHA, S

rket and abo

and Piaggi

ny, general

aper, and ma

rtising eff

t, there is

it is commo

ght like Sho

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us as a feat

ts in it.

s that espec

is very qui

d that Vietn

efore. But t

visit there

less neces

from now on

mentioned a

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out 80% of m

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ly speaking

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fectiveness

little amus

on to see TV

owa Era of J

e. However

ture of the

Source

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thanks

these

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.

above,

aggio.

market

ention

g, are

seems

of TV

sement

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it is

sales

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the a

SEO,

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HONDA

leads

(TV C

We ca

assum

chann

reover, thes

advertising

Facebook. A

ould like to

A : HONDA su

s the motorc

CM)

an see TV CM

me how big i

nel of HONDA

Pict

se days, eac

in SNS, su

A WEB site i

o observe t

upplies the

cycle marke

M of HONDA a

nvestment i

A, such as

ture６ Conc

ch company’

ch as devel

s also alway

the examples

advertisin

et of Vietna

nytime, so t

n TV advert

12 ca ting

18

cert with f

s power is

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ys updated a

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ng expenses

am.

that you may

tisement of

and An toa

amous music

put also i

banner adve

and the refi

e two major

presumed 1

y certainly

HONDA is. M

n giao thon

cians

nto web mar

rtising to

ned impress

makers, HO

billion ye

see when TV

Moreover, th

ng, etc.

Source

rketing. The

famous WEB

sion is rece

ONDA and YA

en in a year

V is on. We

here is a sp

e：WEB

ey are

site,

eived.

MAHA.

r, and

could

pecial

（Eve

In

HONDA

ship

is es

（Web

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of a

http:

ent）

the special

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was engaged

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ere is no Fa

special TV

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the first 1

ress and mod

ing Japanes

n or more.

cene of SH

e of its comp

2catinh

19

of the spec

00 buyers o

dels of Viet

e-style dis

series anno

pany, but fa

cial channe

of highest-c

tnam etc. we

h in the cel

ouncement e

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electric

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bicycle typ

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as a featu

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m. One is ele

d by electri

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e：WEB

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nd has

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ectric

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this

inves

a lot

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and a

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stigation, w

t of electric

800USD, some

and almost

e situation

tric bikes w

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tric motor a

think of th

tric bikes w

etween 300 t

helmet. The

ents.

we searched e

c bikes were

e model pric

all design

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of competit

ere imported

tion, elect

assist bikes

he Japanese

with pedals t

to 500 USD.

erefore elec

electric bik

imported fr

ce was more

ns are copie

rice and sp

tors is desc

d from China

ric bikes we

became popu

motor assis

that are use

In addition

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26

ke market fr

rom china ar

than 1,000U

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pec of Chine

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ere disappe

ular. When i

st bicycles

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to the pric

are popular

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t comes to e

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ttery short

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l now. In th

s below. The

cation of s

cycle maker

c bike

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oned above,

ny troubles w

he market. R

electric mot

Vietnamese

age. In gene

not require

school and ju

his investig

e price was a

scooter is a

rs.

ce：Terra M

large amou

will be ment

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tor assist b

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gation,

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it comes t

ory in Binh

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er, their b

not been est

ferent brand

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of distrib

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the picture

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case in Han

of the sho

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competitor

et share. How

o electric

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e domestic s

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rand names

tablished i

ds and diffe

ycle has not

ution chann

in the firs

Vietnam wher

es below, sh

nt from Japa

. Apart from

oi. There a

ops is not f

27

Chinese el

for these e

wever, ASAMA

bike market

vince near H

sales, it se

e other elec

are not wel

n the elect

erent custom

t been esta

nel of elect

st district

re most of th

hop design,

anese maker

m HCMC, the

are individu

founded.

ectric bike

electric bik

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t. ASAMA is

HCMC. It sta

eems to expo

ctric bike m

ll known at

tric bike i

mer segments

blished yet

tric bikes

of HCMC. T

he shops sel

customer su

s. Electric

re are seve

ual shop and

es

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kes company

entioned in

the Taiwan

arted its fa

ort their pr

manufacturer

the moment

ndustry. We

s, such as th

t.

is that we

here are a

l the same k

upport, and

c bike stree

ral shops t

d shop stre

by：Terra M

y is ASAMA.

the convers

capital co

actory oper

roducts to T

rs such as H

. In conclu

e could say

hose found

can see a l

cloth stree

kind of prod

after servi

et in the HC

that can be

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28

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nam from Chin

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use these p

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t explains t

te at the ye

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batteries t

h 2-3 years

th use and a

terms of it

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to see the si

or sometime

companies,

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f these 2 p

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roducts don

battery, m

are broken,

ikes rose sh

the sharp de

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that Chinese

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asures. Roa

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so, it is ve

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activities

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electric bi

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are also pe

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school, th

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be grasped.

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31

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the price

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32

Brand, Pric

lt is below

ion of purc

ustomers are

ple answere

series (App

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our electr

consumptio

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price is th

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brand image

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34

４. Law・Regulation

We ordered the law firm named Tam & Associates in Vietnam（Address：4th floor, TSC Ben

Thanh Building ） to research the law/regulation regarding

manufacturing/selling/advertising of electric bike. We write down the main point taken

from the concrete report.

The electric bike we manufacturing is categorized as Electric Motorcycle (Electronic

Motorcycle：Motorcycle driving with motor and exceeding the top speed 50km/h.) And we

have to follow the all regulation under this category. On the other hand, electric bike

is recognized as one category of a motorcycle which means it is also recognized as a tractor,

3wheels vehicle, moped. Thus the electric bike should follow the regulation not related

to electric bike. The Law/Regulation for electric bike is not decided yet in this

situation.

4.1 Law/Regulation for the company and product their business is manufacturing electric

bike (including motorcycle)

We have to follow these items under the announcement from Ministry of Industry and Trade.

＜Related to the company＞

The Company must make investment on its own or enter into joint ventures for

investment in manufacturing motorcycle details and/or detail assemblies so as to

attain the minimum localization rate of 20%

The Company must make investment in technological equipment systems to manufacture

details and/or detail assemblies on its own; the motorcycle assembly and quality

control chains must ensure technical requirements and conform to the designed

assembly capacity

Workshops, warehouses and storing yards, offices and auxiliary works of the

Company must be built on land areas leased for long-term use for 15 years or more

under the localities’ industrial development planning.

The motorcycle accessories manufacturing zones must be arranged separately from

the motorcycle assembling zones, with a sufficient ground area for arrangement

of manufacturing technological chains.

The workshops floor must be covered with anti-slip paint, painted with boundary

lines to show safe passages and production technological sites.

35

＜Related to manufacturing＞

Motorcycles must be assembled on conveyor belts in strict compliance with the

technological process with adequate fixing and specialized inspection equipment

The lined-off motorcycles must be wholly checked regarding their general norms

Enterprises must test their motorcycles by letting at least 1% of the lined-off

ones run on the road.

The results of quality inspection of the lined-off motorcycles must be filed for

at least 3 years.

The Company is required to follow the inspection of the technical quality, safety,

and environment protection Ministry of Transport.

o Inspection of Manufacturing and lined-off motorcycles

o The producer / assembler may only commence the production or assembly of

a product after being issued with the Certificate.

o To maintain the product quality during mass production and grasp the rate

of defective ratio.

o To recall their products in case of being needed.

＜Related to employment＞

・ The Company must obtain certificates of the ISO 9001-2000 quality control system.

・ The Company must make the roles and formation about manager, designer, engineer,

sells staffs clearly and write down them

・ The Company must write down the explanation regarding the warranty related to

products and content of warranty on the warranty document.

〈Related to the labor standard〉

・ The limit of employing foreigner in Vietnam (the number of foreigner employee

should be less than 3% of all employments were banned in March in 2008

・ The labor must be more than 15 years old and able to working. They should make

labor contract.

・ Working time is at most 8 hours in a day and 48 hours in a week basically.

・ Retirement age is 60 years for men and 55 years for women.

＜Related to importing＞

・ The spare parts bought and imported into Vietnam must have lawful origins,

including names and addresses of the manufacturer, the importer or the supplier

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of such spare parts.

・ The imported spare parts should be manufactured by factories which have been

recognized by ISO 9000 or QS 9000 Standards

・ Saving the regulation related to Importing lined-off motorcycle

４.２ Law/Regulation for selling electric bike

Within the permitted scope of manufacturing electric bikes as provided for in the

Investment Certificate, the Company is legally allow to distribute its assembled,

manufactured electric bikes to dealers, end users and in showroom within the entire

territory of Vietnam.

＊The showroom is required to be registered with the provincial licensing authority and

incorporate into the Investment Certificate.

Organizing conferences and seminars involving the display and introduction of

goods and/or services

Displaying and introducing goods and/or services online and in other forms

specified by law.

Agency

＊Agency relations are established based on agency contracts which must be made in writing

or in other forms of equivalent legal validity. The principal is the owner of goods or

money delivered to the agency

＊Where principals fix goods purchase or sale prices or service charge rates, agents shall

enjoy commissions calculated in percentage of such goods purchase or sale prices or

service charge rates.

＊Saving another regulation because they are quite common.

４．３ Law/Regulation for promotion and commercial advertisement

We recognize there are no special regulations regarding the promotion and Ad for

electric bike. And these are similar to another country’s common ones. However we have

to care following these items.

・ The company who do Ad should be the company or Joint Venture established in Vietnam.

The Representative Office cannot do it.

・ Ad regarding Alcohol and Cigarette is banned. Thus we have to check when we do

some promotion activity with those kinds of products.

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・ WE have to register from the traders and submit the permission sheets to do

promotion activity.

Giving samples of goods or providing samples of services to customers for

trial use free of charge. Plus traders must set aside and remit 50% of the

value of the prizes already announced into the state budget in cases where

there is no prize-winner

Sells Promotion as the price less than cost.

４．４ Other Law/Regulation

Mr.Hayashi, General Director of Terra Motors VN has already gotten Working Visa. So

that is not a serious issue. Long Hau industrial park is caring about the condition under

the law regarding the regulation of factory environment. As we mention below, we have

already passed the inspection of environment. Plus we have already gotten an investment

license with no matter too.

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5． Final Summary

Motorcycle market in Vietnam will grow because the market is not only big but also it

has a special situation of traffic system and population. However e-bikes have still very

bad image because of Chinese electric bikes even though the air pollution is bad. We

believe in that our electric bike has potential to change the image toward Chinese electric

bike and switch from motorcycle to electric bike. Our sells volume will not big due to

high price model in the first year however we will achieve a few percent of market share

after reducing the price every year. And then we convinced that we can contribute to the

issues of traffic system and environment with the next model “hybrid electric bike”

and cheaper electric bike. Plus we also know we can contribute to Vietnam to create new

employment, improving the technology related to electric vehicles and education people

after we will set the factory in Vietnam and hire many staffs there.