Auto industry likely to shy away from local bid

Experts warned it was impractical for a developing country like Vietnam to dream of locally produced automobiles while deliberating an industry master plan for 2020 and a vision for 2030.

At a recent workshop on this issue, many executives from the auto industry frankly ruled out the option for a local brand name, recommending intensive investment in production of auto parts for local assembly or just taking a part in global production instead.

An experienced designer and consultant in auto technology named Nguyen Minh Dong said preferential duties offered by the government for complete knock-down (CKD) in Vietnam would not work. He argued that even international auto giants could make just 36-45 per cent of parts by themselves, leaving the rest for foreign suppliers.

The Industrial Policy and Strategy Institute (IPSI) under the Ministry of Industry and Trade shared the view, saying the automobile industry had missed almost all the targets on “localisation” by 2010, despite the government’s stimuli.

In the previous master plan, which ended in 2010, and a vision for 2020, the government had given the auto industry very good tax rates with a cut of between 60 and 100 per cent of the special consumption tax in the first five years.

Facing numerous failures in making cars, many enterprises have tried to find a way out for their own enterprises.

The Truong Hai Auto Company, for example, is intensifying investment in truck components, which have not only taken a firm foothold in the domestic market but also received big orders from Kia Motor Company in the Republic of Korea .

Its owner and CEO Tran Ba Duong said, “We are making parts to international standards, which meet global market demand, instead of trying to make an entire car”.

Some joint ventures with foreign companies such as Toyota and Honda have shifted to importing vehicles in the form of CKD to cash in on the potential zero import tariff rate to be levied on vehicles imported from members of the Association of Southeast Asian Nation (ASEAN) by 2018 in line with the nation’s commitments to the World Trade Organisation and the ASEAN Free Trade Area (AFTA).

President of the Vietnam Auto Engineers’ Association, Du Quoc Thinh, predicted a big change in the domestic auto market from 2015, with a trend toward imports instead of production.

He therefore called on responsible agencies to study the conditions and capacities of domestic enterprises, to work out a suitable orientation for the car industry in the second decade of the 21st century, in the interest of both business circles and consumers.

Official statistics showed that up to 2010, the national car industry boasted 397 businesses, of which, 12.8 per cent specialised in assembly, 10 per cent in production of frameworks, bodies and carriages, 52.7 per cent in parts and accessories and 24.4 per cent in maintenance. – VIR

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