Auto sector at the crossroads

Industry insiders are weighing up whether taking part in the global production chain of well-known car brands or turning out locally-made cars.

Chairman and general director Tran Ba Duong at Truong Hai Auto Joint Stock Company (Thaco) – a local key player in the auto industry- assumed that when multinationals raced against time to turn out new products in the shortest possible time local firms had better take part in the global production chain of leading car brands than striving to turn out locally-made cars.

Going in this direction, Thaco has manufactured tipper lorry bodies for export to the Middle East at prices 12 per cent lower than similar products of South Korean origin.

“Global car giants have optimised their benefits through placing direct orders with spare parts manufacturers who are in a position to provide them products at competitive costs. Thaco is going this way,” said Duong.

Thaco reportedly operates three auto assembling plants and 17 accessories and spare parts manufacturing businesses at Chu Lai Open Economic Zone in central Quang Nam province.

Reality shows that of 2010 development targets set in prime ministerial Decision 177/2004/QD-TTg dated October 5, 2004 approving Vietnam’s auto industry development plan to 2010 with a vision towards 2020, Vietnam only outperformed the target of car and spare part export production value which was mostly created by foreign-invested firms, said deputy minister of Industry and Trade Le Duong Quang.

In this context, Duong suggested local firms to first engage in manufacturing auto simple parts at affordable prices while ensuring quality standards to build up prestige.

General secretary of Vietnam Association of Automobile Engineers Du Quoc Thinh said joining the global production chain was a viable way as more car manufacturers have shifted into acting as sales agents for foreign firms for higher profit margins in the context Vietnam will open up local market to foreign car manufacturers following the Common Effective Preferential Tariffs scheme under ASEAN free trade area (CEPT/AFTA) by 2018.

He pointed out that 90,000 completely built units (CBUs) were imported into Vietnam in 2009 alone while the country could only assemble 100,000 cars in the same year.

“Production by local car makers will be hardly affected from 2015 when Vietnam’s auto import duties start to go down in light of total market openness by 2018,” said Thinh.

Statistics released by the Ministry of Industry and Trade’s Institute for Industrial Strategies and Policies, showed that Thailand accommodates seven out of 11 largest car manufacturing plants in Southeast Asia with an annual production capacity of over 1.4 million vehicles.

The remaining plants are positioned in Indonesia and Malaysia with an annual production capacity of around one million vehicles while Vietnam’s current production capacity is more than 400,000 vehicles per year. – VIR

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