The imbalance between supply and demand continues to worsen as the pandemic disrupts supply chains in global markets. The world’s fuel prices continue to rise, affecting the prices of fuel and raw materials in Vietnam. The inflation pressure was extremely high in 2022. Among them, steel prices have increased by about 25% to 30% on average since the beginning of 2021. In addition, the Vietnamese government has reduced the corporate income tax rate, which has become a key factor for foreign investment to consider transfering supply chains to Vietnam. In response, our practical strategic plans are as follows:

Countermeasures

Motorcycle

Industry TrendsOpportunitiesRiskCountermeasures
• Diversified product lines to satisfy the demand for one-stop purchasing• The infrastructure in Vietnam is still at the development stage. The day-to-day transport relies mostly on motorcycles.• The growth in Vietnam’s motorcycle market is slowing down.• Besides exporting automotive and motorcycle parts as a source of income, Eurocharm also coordinated with Honda, Yamaha and Piaggio to explore completely-built-up (CBU) automobile export opportunities. In 2019, the number of exported CBU automobiles from three major customers reached 300 thousand. Since customers have a stricker standard for the exported CBU automobiles, Eurocharm is increasingly recognized due to our competitive quality, delivery time, and price. The amount set for the producing exported vehicles is increasing every year. In addition, the Company is expanding the opportunity in the electric mortorcycle market and gradually increasing exporting the sales volume of electric motorcycle components.
• Eurocharm maintains long-term good partnerships with its major customers and provides insights and demands regarding market information to jointly expand the market.• The scale of the ASEAN economy continues to grow, along with the demand for motorcycles.• The core product design capability still lies in the hands of OBMs.• In upcoming years, Eurocharm is prepared to strengthen the R&D department with product design capability, adding R&D equipment for drawing and product characteristics verification, and continuously investing in R&D of new products to improve product quality and provide integrated and high value-added products to make our products more competitive.
• Since 2013, Eurocharm have introduced aluminum alloy for processes. In recent years, Eurocharm have successfully entered mass production and have been gradually expanding our business with major medical equipment manufacturers in Europe and the U.S. and leisure vehicle customers in North America. In 2015, Polaris has expanded its business to include high value-added customers such as Ducati and Harley-Davidson, while exporting products from iron parts to high-end aluminum products.
• Globalization vision with product management and investment in improved automated production.• Eurocharm possesses an extraordinary management team.• The cost of largely imported raw materials could be fluctuated by the exchange rate.• Eurocharm began domestic procurement along with importing customer certified raw materials. The ratio of local raw materials has gradually increased from 50% to 80%. Due to this shift, the exchange rate has only minimal effect on Company’s operation cost. In addition, with the unified purchase system every quarter, the Company is able to easily manage materials and reduce the risk of running low or waste.

Medical Equipment

Industry TrendsOpportunitiesRiskCountermeasures
• Safety is of the most importance for automobiles and motorcycles, so vehicle assembly factories have extremely strict requirements for quality. Our company has been certified for many years with ISO 9001 & ISO 14001 & ISO/IATF 16949 quality management systems, and our automotive and motorcycle components have been highly recognized by customers for their quality. In addition, we also obtained ISO 13485 certification for the medical equipment industry in 2010.

• Trusting employee relations and high productivity.
• The world’s population is aging and the demand for medical equipment is increasing.

• American and Japanese medical equipment markets continue to expand as the government implements healthcare supporting polices.
• The Company juggles between producing high-quality refined medical equipment while competing with low-quality affordable products.• Eurocharm’s medical equipment are supplied to a niche market which specializes in long-term home care or patient care. The customers are in various developed countries including France, Japan, and the United States.
Under the circumstances that the target markets are consumers in economically developed countries, the product quality is considered more important than price competitiveness. From the sales growth year after year, it is believed that the customers trust and rely on Eurocharm’s products.
Also, as the minimum wages and social insurance expenditure increase in China, Eurocharm has a comparative advantage manufacturing medical equipment in Vietnam. If the competition chooses to source cheaper materials, it should eventually reflect on the quality of the equipment. Additionally, the Company has the capacity of developing medical equipment tooling which sets it apart from the rest of competition. Eurocharm has, on various occasions, co-developed with customers or self-developed tooling or products.

Business Plan

The global economy has gradually stepped away from the impact of the COVID-19 pandemic, and production orders are gradually recovering. Although there are still a few regions affected by wars and inflation, the operational pressure on businesses has significantly decreased. Furthermore, the quarterly decline in material prices has contributed to a significant improvement in the Company’s operations and profitability in the fiscal year 2022.

Expansion of CapacityEmphasis on Medical Equipment MarketDevelopment of Electric Scooters and Recreational VehiclesDevelopment of Automobile Parts

To accommodate the future growth of the customers’ businesses, our Baishan Industrial Zone II has been successfully completed and started mass production in 2022, aligning with the significant business growth in the same year. Moving forward, the company will continue to invest in equipment and expand production capacity based on customer demands. Additionally, we will continue to expand our mold factory and relavant processing equipment, while continuously improving the in-house production ratio of molds, inspection tools, and fixtures, as well as enhancing product development speed. We will also accelerate introducing automation implement to mitigate operational risks resulting from the increasing wages and labor shortage in Vietnam.

The company continues to expand the cooperation with the existing European, American, Japanese, and other international health and medical manufacturers, and actively strives for the introduction of new product business. In terms of the proportion of product revenue this year, in addition to the current steady increase in customers, new customers will also join in 2022, and it is expected that the growth force will be further enhanced in 2023.By the end of 2022, several of the Company’s electric motorcycle customers have entered the development or mass production stage, and we hope to leverage the Group’s experience and advantages in motorcycle frame production to continuously explore new opportunities in the electric motorcycle market. In the recreational vehicle sector, our company has been investing significant resources in recent years to tap into the market. Currently, in addition to steadily increasing shipment volumes to existing North American and European recreational vehicle brands, we anticipate the introduction of new products in 2023 and expect the business to maintain a high level of growth in the coming years.In response to the opportunities in electric vehicles and automotive components, the Company not only continues to strengthen cooperation with existing automobile customers but also actively pursues business development with other manufacturers. Additionally, we are actively expanding the electric vehicle component business and hope that it will contribute to our future performance and profitability growth.

External Initiatives

On September 10, 2014, the 68th session of the United Nations General Assembly adopted the Sustainable Development Goals (SDGs) as the successor to the United Nations Post-2015 Development Agenda. In 2015, the United Nations officially released 17 SDGs and 169 sub-targets, establishing a clear vision and priorities for sustainable development. The Group focuses on achieving full productive employment before 2030, so that all men and women can have a decent job. In addition, since Vietnam is a developing country, Eurocharm encourages employees to innovate and increases the number of R&D staff and R&D spending.