Tariffs make life tough for auto industry

The fledgling Vietnamese auto industry faces a serious challenge as the country gradually cuts import tariffs under its World Trade Organisation and ASEAN Free Trade Area commitments.

The tariff on vehicles with more than 10 seats was reduced to below 5 per cent in 2006, while the tax on those with less than nine seats will be waived by 2018.

Meanwhile, global auto giants are making plans for massive investments in the Asia Pacific region, especially in countries like China and Thailand, meaning they will all eye Viet Nam as a major export market following the scrapping of import taxes.

Economists and auto industry analysts fear that the local industry will go under when this occurs.

There are only seven years left for this scenario to become true. The industry admits that in the preceding 20 years it was unable to develop despite the many incentives offered by the Government.

Du Quoc Thinh, general secretary of the Viet Nam Association of Automobile Engineers, said when car import tariffs were abolished, almost every Vietnamese auto company would be forced to close down.

Of 50 that assemble vehicles, only Truong Hai Auto, which hopes to sells 35,000 commercial vehicles this year, would remain competitive, he added.

Economist Le Dang Doanh said it was very difficult for Vietnamese companies to manufacture automobiles and suggested they should follow Thai enterprises and focus on making components.

Thailand is the largest manufacturer of car parts in Southeast Asia.

But officials from the Ministry of Industry and Trade disagreed, saying that carmakers should focus on producing cars to meet the expected surge in demand.

Automobile sales increased to more than 100,000 last year from 5,000-7,000 just a decade ago. — VNS

Tags: Vietnam automotive, Vietnam automotive industry, Vietnam autos market, Vietnam car imports