Set up a bicycle manufacturing unit in Vietnam

Set up a bicycle manufacturing unit in Vietnam

Set up a bicycle manufacturing unit in Vietnam

30 August, 2020


In this article we will guide you step-by-step to setup a bicycle manufacturing unit in Vietnam as well as help you understand why manufacturing bicycle in Vietnam is better than China.

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1. REASONS YOU SHOULD SET UP A BICYCLE MANUFACTURING UNIT IN VIETNAM RATHER THAN CHINA:

1.1 LOW SETUP COST:

Setup Cost is an estimate about major expenses before and during your business operation compared to other countries so that you will have a suitable plan to invest in Vietnam.

There are 3 major factors that affect your SETUP COST in Vietnam and have made Vietnam as an attractive place:

  • TAXES AND POLICIES
  • PROPERTY
  • LABOR WAGES

Although SET UP COST in Vietnam is among the lowest in South Asia, there are more interesting things:


TAXES AND POLICIES:

To bicycle manufacturing, there are generous preferences from the Vietnam Gorvernment : land-use, tax incentives, together with FTA preferences you will receive because Vietnam has signed a lot of Free trade agreements with the EU, the US and many developed countries.


Remarkably:

-EVFTA (free trade agreement between the EU and Vietnam), effective 1st August, 2020. The EVFTA is bringing tariffs of 2 sides to 0%.

-ACFTA (Asean and China free trade agreement, Vietnam is a member of Asean and closest to China, with ACFTA, many assessories of bicycle from China to Vietnam with 0% import tax. China is the largest manufacturer of bicycle’s assessories and they are cheapest. In Vietnam, there are many suppliers who already imported assessories of bicycle from China, and it is most suitable for small bicycle manufacturers in Vietnam.

-The U.S-Vietnam Bilateral Trade Agreement (BTA), tariffs on goods of 2 sides decreased significantly.

-Vietnam has also joined major (FTAs) and trade agreements worldwide: CPTTP, WTO, ACFTA, VNEAEUFTA, AHKFTA, etc.

-Currently the tariff that the EU imposes on China’s bicycle is 48.5% while Vietnam, Taiwan, Turkey, Thailand is only 10% and among the lowest countries (10% to Vietnam is before EVFTA).

-Trade war between China and the U.S helps increase the number of bicycle exporting from Vietnam to the U.S, at the same time, the number of China’s bicycle exporting to the U.S in the first quarter of 2019 reduced 54% corresponding period of preceding year.

Also making business or open company in Vietnam is much easier than China, due to policies of the Government to attract FDI.


PROPERTY (build or lease a factory):

Build new one, built-to-suit, ready-built warehouses/factories or local’s warehouses are among the most common types in Vietnam. You can build it from the ground as a foreigner or lease it:

-Build a new factory/warehouse from the ground:

First, you need to have the design, then use the design to apply for a construction permit granted by the authorities.

Building a new one is usually for the investor who intends to stay business in Vietnam long term, the cost to build a new factory or a warehouse varies, depending on the location, the standard, land-use preference.

For example, if you are going to build an one-hectare factory around Ha Noi, the cost will be about 1.6 million to 2.2 million USD, which is including 50-year-land-use, construction fee and licenses fee.

(Industrial real estate price is 30%-40$ lower than that in Thailand or Indonesia).

-Ready-built factory/warehouse:

In 2020, regardless of COVID-19, the price of industrial real estate leasing is going up 10% corresponding period of preceding year as the moving wave from China to Vietnam in manufacturing sector increasing. Ready-build warehouse/factory will save time and procedure for entrepreneurs. The price for leasing is between $2 and 5$ per square meter per month.

See more: How we helped client optimize the setup cost and growed business in Vietnam.


LABOR WAGE:

One of the major advantage in Vietnam for manufacturing is low labor wage and less than half as that in China. In 2020, minimum wage of worker in biggest city is less than $200 per month.

Minumum wage in Vietnam (2020).


1.2 STABLE POLITICS:

Vietnam is among a few countries in the world that has a stable political environment while the locals are polite and gentle.


1.3 STRATEGIC LOCATION:

Located in the center of ASEAN, Vietnam has a strategic location, it is close to other major markets in Asia, the most notable neighbor of them being China.

Its long coastline with more than 3000 kms, direct access to the South China Sea and proximity to the world’s main shipping routes, perfect conditions for trading.


2. HOW TO OPEN A BICYCLE MANUFACTURING COMPANY IN VIETNAM:

Step 1: CHOOSE A LEGAL ENTITY, there are 2 common legal entities to start with, it is depending on your scale of business, number of founders:

A limited liability company or

A joint stock company.


Step 2: OWN A PROPERTY, owning a land-leasing-contract or a warehouse-leasing-contract is a legal basic to establish a manufacturing company in Vietnam, it is used to apply for certificates or licenses. There are many sources that you can lease a land for 50 years or a ready-built factory/warehouse, you can also contact directly to the owners or through us.


Step 3: CERTIFICATES, after you chose a legal entity to start with and owned a property as described in step 2, this step is to bring it come true and ready to do business in Vietnam:

-Apply for an investment certificate from the department of planning and investing.

-Apply for a business registration certificate.

-Other licenses:

  • Construction permit – in case you intend to build a new factory
  • Fire protection and fire safety license.

(The dossiers you should prepare in your contry is just copies of your passport).


Let contact with us for free consultancy !


MORE TIPS:

Register a company in VN, 100% REMOTE (click here)

Setup cost estimate (click here)

How did we help a foreigner (who has never stepped in Vietnam) set up a manufacturing in Vietnam (click here)

Pros and cons of setting up manufacturing in Vietnmam (click here)