VAMA says taskforce needed to build up strategic vehicle

The Vietnam Automobile Manufacturers Association (VAMA) has suggested that the Government set up a taskforce charged with finding out a strategic vehicle for the local automobile industry, rather than giving the mandate to a single ministry.In its petition submitted to the Government last week, VAMA said the taskforce should be more widely representative so as to bring out the best solution for developing a strategic line of automobiles. Such a taskforce should include relevant authorities such as the ministries of Industry and Trade, Finance, Transportation, Science and Technology, and Planning and Investment, as well as VAMA and other related sectors.

The petition came out weeks after the Ministry of Industry and Trade proposed to the Government a strategic automobile, which once approved will enjoy special financial incentives for development. However, this proposal immediately drew criticisms from experts.

The VAMA petition is a direct response to the ministry’s vision on the strategic automobile, which the ministry said should be a multi-purpose vehicle (MPV) of six to nine seats and having an engine capacity of less than 1.5 liters.

VAMA said that in principle, most of its members agreed with the necessity of building a strategic vehicle, which in the long term would be of great help for the development of Vietnam’s automobile industry and supporting industries.

However, “this is an important issue, so things need careful studies and discussion,” VAMA said, adding open discussions are required before the final decision.

As the selection of a strategic automobile is of paramount importance, VAMA said that the issue should not be hastily concluded, and relevant entities should have until the first quarter of next year for discussions.

The Ministry of Industry and Trade in its proposal said that a strategic car, apart from criteria mentioned above, must also meet Euro 2 emission standards to better protect the environment.

The ministry maintained that such an MPV should meet the tastes, needs and financial capability of local consumers and that on top of these, affordable prices would be a decisive factor for better competition with import cars in 2018 when the market is opened up to foreign firms.

In realty, MPVs are in great demand in the country as they are convenient thanks to their diverse functions, according to the ministry.

But experts have cast doubt over the ministry’s plan, saying such vehicles have a heavy duty but come with a low-capacity engine, which by contrast will consume more fuel and cause more serious pollution.

Some drivers, automakers and experts said that they cannot understand how the ministry wants to develop a model with many seats but a low engine displacement. Such a car would be ‘weak’ and perform badly under actual road conditions here, they say.

Now popular on the MPV market segment are Innova, Fortuner, Ford Everest, GM Daewoo’s Captiva and Mitsubishi’s Jolie and Zinger, but they are not close to the one proposed by the ministry.

Ngo Van Tru, deputy head of the ministry’s Industry Department, told a seminar in HCMC last month that demand for private cars would rise sharply from 2015 onwards. The market share of trucks and buses will gradually fall from the current 50%, so the industry should devise a strategy to develop cars whose demand will jump in the long run, he said.

The market has been overwhelmed with an array of different types of automobiles, making it difficult for the country to develop supporting industries to supply parts for automakers to increase the rate of local content in their products. That is just the ministry’s subjective proposal, Tru told at the seminar.

The proposal is being passed around to garner comments from the relevant ministries and government agencies. “Automakers might come up with a new idea that is better than the ministry’s proposal,” Tru said.

According to the ministry’s proposal, the planned strategic line of multi-purpose vehicles will enjoy tax incentives including the lowest special consumption tax possible, at 30%, compared to the popular rates of 45%, 50% and 60%.

And those companies joining the program will be offered corporate income tax reductions or exemptions, and a 0% tariff for import of equipment and materials. VAT and car registration fees would be cut by half, according to the proposal.

The Saigon Times Daily

Tags: Vietnam automotive industry