I tried to develop my company from Ireland, but found it was challenging managing the supply chain and production from home. I travelled to Shenzhen in China to meet some factories and suppliers, hoping to make real progress. However, as a small company at the time, we weren’t able to get the meetings with the big factories.
I ended up going to Vietnam to see a motorbike factory. I was so impressed I skipped my flight home and have stayed ever since. It has been three years now. I am currently engrossed in product development and manufacturing in an industrial hub outside Ho Chi Min. I’ve built a fairly big team and we are doing well from Europe’s E-bike boom. Vietnam is less developed, so we are not competing as much to get into the factories. We also got in early. If you are a new company entering Vietnam today, you could struggle to get into the high-tech, high quality factories with a small brand.
Most of our sales are into Germany, Switzerland, the Netherlands and Austria. We employ 16 people in Vietnam today and have produced 1,000 frames so far; we began shipping in December 2020 and aim to produce 1,000 bikes a month from next year.
Around 60% of our parts are sourced from Vietnam, the rest comes from China and Taiwan. We aim to increase this to 100% in the first half of 2021. The majority of the inputs from Vietnam come from within 50km of our factory, and not having to go to China saves us huge amounts of time. The bike’s final assembly and manual processes all take place in a factory in Ho Chi Min that we rent with other manufacturers. We are looking to open our own factory in Q1 next year.
The growth in E-bikes has led to key suppliers of bike parts like rims, saddles and breaks in China and Taiwan stopping taking orders for 2021. Some factories are even saying if you place your order now, you won’t receive it until September 2022. It’s lucky we are in Vietnam. There isn’t as much of a bike industry in Vietnam and so local factories haven’t had the same problems. People are also working hard to convert old factories used in the auto sector to produce bike parts.
Tariffs are another reason for choosing to manufacture in Vietnam. With the European Free Trade Association (EFTA) trade agreement, 99% of tariffs will go to zero over the next six years. That is attractive because there are high tariffs for E-bikes into Europe made in China.
In some ways it’s easier to build a supply chain in China because you can find suppliers through Alibaba – it is a huge marketplace and there is nothing like this in Vietnam. Big companies in Vietnam don’t even have websites. It means finding suppliers involves building your network and attending industry trade shows. Finding high quality factories up to IOS standards is also difficult; finding factories that can produce large quantities of a product is another challenge. Nor do many factories in Vietnam have that much money to invest in their equipment.
Laws are also unclear in Vietnam which makes things challenging. But there is a large and available workforce. Labour costs are also lower than in China, though higher than in Cambodia.
More companies are arriving in Vietnam. The main frame factory we use is doing around four times more business now compared to just six months ago. And Vietnam hasn’t locked down with COVID, so factories have been running the entire time. This has bought a lot of business from China – along with EFTA. The more companies that come here, the easier it will be to do business.