Vietnam's Aluminum Casting Export Trends: Business Opportunities and Future Prospects for Japanese Companies | Daiwa Light Alloy Industry Vietnam Co.,Ltd

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Introduction

As the global manufacturing map undergoes a significant transformation, Vietnam, a rising power in Southeast Asia, is rapidly emerging as a new hub for supply chains. Its presence is growing daily, particularly in the field of “aluminum casting,” which can be considered the heart of the automotive and electronics industries. Armed with improving quality and cost competitiveness, the export of Vietnamese-made aluminum castings is steadily expanding, making it an indispensable option for Japan’s manufacturing sector. This article provides a thorough analysis of Vietnam’s aluminum casting export trends based on the latest data. It offers a comprehensive explanation of the business opportunities that Japanese management and procurement managers should seize now, concrete methods for leveraging them, and countermeasures for potential challenges. We will deliver practical insights for achieving cost reductions and realizing a “China Plus One” strategy.

The Expanding Vietnamese Aluminum Casting Market and Its Background

In recent years, Vietnam has achieved remarkable development as a manufacturing cluster against the backdrop of stable economic growth. The aluminum casting market, in particular, is on a strong growth trajectory, supported by vigorous domestic and international demand.

Key Drivers of Growth in the Vietnamese Market

The demand for aluminum castings in Vietnam is primarily driven by three sectors. First is the transportation equipment sector, as Vietnam is one of the world’s leading motorcycle producers and has seen significant growth in its automotive industry recently. Domestic car sales in Vietnam reached approximately 300,000 units in 2023, increasing the need for local procurement of related parts. Second is the electronics and electrical products sector, where giant global corporations like South Korea’s Samsung Electronics have established production bases. Aluminum castings are essential for components requiring lightweight and complex shapes, such as smartphone casings, internal parts, and home appliances. Vietnam’s total export value is projected to exceed $405.5 billion in 2024 (a 14.3% increase year-on-year), with electronic products accounting for a large portion. The third driver is the expansion of the construction and infrastructure sector, fueled by economic growth exceeding 6% annually. Demand for building materials and urban development-related materials also strongly supports the market.

Government Support and Foreign Investment Attraction

The Vietnamese government has positioned the advancement of the manufacturing industry as a pillar of its national strategy, focusing on fostering “supporting industries.” To actively attract foreign direct investment (FDI), it offers incentives such as preferential corporate tax rates (e.g., tax exemption for the first four years and a 50% reduction for the next nine years for specific projects) and reductions or exemptions on land use fees. Furthermore, by developing over 400 industrial parks nationwide and enhancing infrastructure like electricity, water, and logistics networks, the government has created an environment where foreign companies can smoothly launch their operations. These policies have attracted foreign investment and significantly contributed to improving the technical skills and production capacity of the entire manufacturing sector, including the aluminum casting industry.

A Data-Driven Look at Aluminum Casting Export Trends from Vietnam

Vietnam’s aluminum casting industry is not only meeting domestic demand but is also becoming a key supplier in the international market. Various data indicate that its exports are on a solid growth track.

Major Export Destinations and Japan’s Position

The main export destinations for aluminum and aluminum products from Vietnam are Japan, the United States, EU countries, and fellow ASEAN nations. Japan, in particular, has long been one of the largest export partners. Due to its high-quality standards, the Japanese market serves as a benchmark for the technical capabilities of Vietnamese companies. According to Japan’s Ministry of Finance trade statistics, the import value of aluminum and its products from Vietnam has been on an upward trend, reaching approximately 150 billion JPY in 2022. This demonstrates that the Japanese manufacturing industry highly values Vietnam’s quality and cost competitiveness, viewing it as a crucial procurement source. Some factories in Vietnam have achieved high quality control with defect rates below 0.2%, meeting the stringent demands of the Japanese market.

Trends in Export Value and Volume

According to data from the United Nations Conference on Trade and Development (UNCTAD), Vietnam’s aluminum export value hit a record high of approximately $1.3 billion in 2022. This represents a five-fold increase compared to 2012, a decade earlier. Despite the pandemic and global economic fluctuations, this strong growth demonstrates the resilience of Vietnam’s manufacturing industry. Exports account for about 10% of production volume, with FDI enterprises playing a central role. As the technical capabilities of domestic companies continue to improve, the export potential is expected to expand further.

<div class=”data-box”>Key Data: Vietnam’s Aluminum-Related Statistics– 2022 Aluminum Export Value: Approx. $1,307.64 million (record high)- 2023 Vietnam Economic Growth Rate: 5.05%- Jan-May 2024 Approved FDI: $11.07 billion (2.0% increase YoY)- Average Monthly Salary for Manufacturing Worker: Approx. 7.5 million VND (Approx. $300 / 47,000 JPY)- Economic Partnership Agreements with Japan: VJEPA, AJCEP, CPTPP, and RCEP are in effect. Source: CEIC, JETRO</div>

Why Should Japan’s Manufacturing Industry Focus on Vietnam Now?

Cost reduction and supply chain stabilization are perpetual challenges facing Japan’s manufacturing sector. Procuring aluminum castings from Vietnam is becoming a viable solution to both of these issues.

Overwhelming Cost Competitiveness

Vietnam’s greatest appeal lies in its cost competitiveness. According to a 2023 JETRO survey, the average monthly base salary for a general worker in Vietnam’s manufacturing industry is about $250, which is 40-50% lower than in major Chinese cities. Labor costs for management-level positions can also be kept to about one-third or one-fourth of those in Japan. Energy costs and capital investment-related expenses are also relatively low, resulting in significant total product cost savings. This labor cost advantage is a major benefit, especially for labor-intensive products like aluminum castings that require numerous processes.

A Strategic Base for Supply Chain Diversification

Over-reliance on a single country exposes the vulnerability of supply chains to geopolitical risks and unforeseen events like pandemics. Learning from this, many Japanese companies are accelerating their “China Plus One” strategy, which involves diversifying production and procurement networks that were once concentrated in China. Vietnam is considered a top candidate for this strategy due to its geographical proximity to China, political stability, and pro-Japanese sentiment. Its long coastline on the South China Sea serves as a maritime transport hub with excellent access to Japan. Indeed, many Japanese companies expanded their investment in Vietnam in 2023, signaling active moves to reorganize supply chains.

Leveraging the Free Trade Agreement (FTA) Network

Vietnam is one of the world’s most proactive countries in promoting FTAs, with 16 agreements in effect as of 2024. With Japan, in addition to the bilateral Vietnam-Japan Economic Partnership Agreement (VJEPA), it is also covered by mega-regional partnerships like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP). By utilizing these agreements, tariffs on the import and export of aluminum castings and related products are progressively eliminated or reduced. For example, with the implementation of RCEP, tariffs on many items will be eliminated immediately or within 10 to 20 years. This allows Japanese companies to further enhance the price competitiveness of parts procured from Vietnam.

Challenges and Countermeasures in Procuring Aluminum Castings from Vietnam

While there are many advantages, procurement from Vietnam also comes with unique challenges. To succeed, it is essential to understand these risks and implement appropriate countermeasures.

Ensuring Quality Control and a Stable Supply

The quality of foundries in Vietnam can vary widely, making supplier selection the key to success. Checking for international quality management system certifications like ISO 9001 is a basic selection criterion. However, beyond certifications, it is crucial to visit the factories in person to verify the thoroughness of their 5S practices (Sort, Set in order, Shine, Standardize, Sustain), inspection systems, and the skill level of their employees. Choosing a factory with resident Japanese engineers or Japanese-speaking staff can facilitate the smooth communication of detailed quality standard nuances. Conducting regular quality audits and providing technical guidance helps build a partnership to improve quality together, leading to a stable long-term supply.

Current State and Future Outlook of Logistics and Infrastructure

Vietnam’s logistics infrastructure has improved rapidly in recent years, but disparities between urban and rural areas still exist. Traffic congestion, especially around ports and on major arterial roads, is frequent and can pose a risk of lead time delays. While large-scale infrastructure projects led by the government are underway, such as the planned completion of the entire North-South Expressway by 2025, it is necessary to manage schedules with ample buffer time for the present. It is recommended to select a reliable forwarder, track shipment statuses in real-time, and secure multiple transportation routes. The utilization of deep-water ports capable of accommodating large vessels, such as the Cai Mep-Thi Vai port near Ho Chi Minh City and the Lach Huyen port in the northern city of Hai Phong, is key to stable transport to Japan.

Overcoming Language and Cultural Barriers

Differences in business customs and communication gaps can cause unexpected problems. In Japan, some things are understood without being explicitly stated, but in Vietnam, clear instructions and confirmation are essential. There are cases where a local staff member’s judgment of “this level of quality should be fine” deviates from Japanese standards. To prevent this, it is effective not only to create detailed drawings and specifications but also to use photos and physical samples to visually communicate quality requirements. Furthermore, it is important to build a relationship of trust through regular meetings and interactions, rather than a simple client-supplier dynamic. A willingness to respect the local culture and values and to engage in patient dialogue will build a strong partnership that transcends language barriers.

Conclusion

As we have seen in this article, Vietnam has achieved remarkable growth as a production and export base for aluminum castings. Its cost competitiveness driven by an abundant labor force, proactive government support, and an extensive FTA network including Japan offer immeasurable appeal to the Japanese manufacturing industry. Especially now, when supply chain diversification has become a top management priority, Vietnam holds the potential to be the core of a “China Plus One” strategy. Of course, there are challenges to overcome, such as quality control, logistics, and communication. However, these can be surmounted by finding a reliable local partner and working together to solve them. To maintain and strengthen competitiveness in a rapidly changing era, now is the time to seriously consider Vietnam as an option and take the first step toward seizing new business opportunities.

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