Amidst the whirlwind of global economic uncertainty, Piaggio's Q1 2024 earnings call might appear, at first glance, to be just another story of a company navigating choppy waters. But beneath the surface, there's a strategic silence, an unspoken truth hidden within the words of CEO Michele Colaninno, that could reveal the key to Piaggio's 2024 success: Vietnam.

The transcript is peppered with Colaninno's pronouncements about Asia's anticipated recovery. He highlights stabilization in March and April, predicting a "slight increase by the end of the year" starting in late Q2. This growth, he insists, will be driven by China's resurgence. Yet, when discussing Vietnam, a country housing Piaggio's largest Asian facility, an intriguing hush falls.

Instead of echoing the optimistic predictions for China, Colaninno simply states, "Vietnam, that is where we have our biggest facility in the Asia market, has reached the top down." No projections, no timelines, just an acknowledgment of a peak. He continues, "...I don't know if tomorrow or the day after will be the time when Vietnam will come back to previous years."

This strategic silence is more than just caution. It's an indication that Piaggio is quietly banking on a much faster, potentially explosive, recovery in Vietnam than anyone anticipates.

Why Vietnam is Piaggio's Secret Weapon

Colaninno is cautiously optimistic about China's recovery by year-end, but he's conspicuously silent about a similar timeline for Vietnam. This suggests a belief that Vietnam's recovery might not just mirror China's, but potentially outpace it. Colaninno's use of "top down" to describe Vietnam's situation is significant. It implies a belief that the worst is over, and a turnaround is imminent. Contrast this with his language regarding China, where he speaks of stabilization, hinting at a slower climb back. Piaggio's decision to highlight new Vespa model launches in Shanghai during the Q1 call, while simultaneously investing heavily in its Vietnam facility, speaks volumes. It suggests a strategy of publicly aligning with China's recovery narrative while discreetly preparing for a rapid ramp-up in Vietnamese production. Piaggio's unwavering focus on maintaining its impressive 17% EBITDA margin, even at the cost of declining revenues, suggests a calculated risk. They're willing to forgo immediate sales in favor of higher-margin production coming from Vietnam. This aligns with their resistance to engaging in Asian price wars, preferring instead to cultivate brand value and premium positioning.

The Hypothesis: Vietnam's Early Resurgence

Piaggio anticipates Vietnam's recovery to begin significantly earlier than China's, likely within Q2 2024. This will allow them to leverage their large-scale Vietnamese production to cater to a burgeoning Asian demand, maximizing their margins while competitors struggle to catch up.

The Numbers Tell the Story

Production Powerhouse: Piaggio's Vietnam facility has the capacity to produce over 1 million vehicles annually. A rapid recovery in Vietnamese demand, coupled with a potential spillover from a lagging Chinese market, could push production close to capacity. Revenue Surge: Assuming a conservative 50% capacity utilization, Piaggio's Vietnamese production could contribute over €500 million in revenue. This, combined with the expected stabilization in other Asian markets, could propel Piaggio to exceed revenue expectations for 2024. Margin Expansion: The higher-margin production from Vietnam, coupled with Piaggio's cost-control measures, could further bolster their EBITDA margin, potentially exceeding the 17% target.

Tracking Production in Asia

This chart illustrates potential production scenarios for Piaggio's facilities in China and Vietnam.

Piaggio's Quiet Confidence Speaks Volumes

Piaggio's quiet confidence in Vietnam is a whisper that should echo loudly in the ears of astute analysts. While the world watches China, Piaggio is strategically positioning itself to ride the wave of a Vietnamese resurgence, potentially turning silence into a symphony of profits in 2024.

"Fun Fact: Piaggio's iconic Vespa scooter was initially inspired by American military scooters used during World War II. The company's founder, Enrico Piaggio, saw an opportunity to create a vehicle that would provide affordable and stylish transportation for post-war Italy."