Illustrative photo (Source: AFP/VNA)Hanoi (VNA) – In order to help boost the Vietnamese automobileindustry – one of the most important contributors to national economic growth –the country could do with focusing on its policy stability, market expansion, supportindustry development, and connectivity reinforcement, according to insiders.
The dream ofa Vietnamese automobile has been nurtured by many Vietnamese enterprises for along time. After nearly 30 years, Vingroup – one of the largest private companiesin Vietnam – made the dream come true by rolling out its two Vinfast cars atthe 120th Paris Motor Show in October.
Expertsassessed that together with the strength of big names like Truong Hai AutoCorporation (Thaco) and Hyundai Thanh Cong Company, the event was a firmfoundation, creating a breakthrough for the development of the domestic automobileindustry after years of slow growth.
The factshows that the industry has developed rapidly over the past two years withseveral major projects being carried out, including a Vinfast automobilemanufacturing complex project, which has a total investment of 35 trillion VND(1.49 billion USD) and a capacity of 500,000 units per year; a Thaco Mazdaautomobile plant project totalling 12 trillion VND with a yearly capacity of100,000 units; and a 1.32 trillion VND Hyundai Thai Cong automobile factoryproject which has a capacity of 40,000 units annually.
Accordingto the Ministry of Industry and Trade, the output of locally manufactured andassembled automobiles surpassed 200,000 units for the first time in 2015, up 51percent compared with that of the previous year. In 2016, domestic automobilemanufacturing reached 283,300 units. Some kinds of vehicles have been exportedto Laos, Cambodia, Myanmar, and the Central American region.
However,the localisation rate of the automobile industry remains low due to the lack ofa network of material suppliers and large-scale parts producers. According tothe ministry’s Department of Industry, although the target rate was set at 40percent for 2005 and 60 percent for 2010, it sits at just 7 to 10 percent onaverage. Thaco leads among manufacturers with a rate of 15 to 18 percent, whileToyota Motor Vietnam reaches 37 percent for the Innova model alone.
Currently, Vietnamhas 358 automobile-related manufacturing enterprises, including 50 assemblybusinesses, 45 chassis and body manufacturers, and 214 parts producers. Thenumber of auto parts producers is reportedly much lower than in Thailand, whichhas 2,500 enterprises.
Theindustry just produces a number of simple parts such as components for chassis,trunks, cabinets, doors, tires and tubes, radiators, brake lines, electricalwires, and wheel rims.
Luong DucToan, an official from the Ministry of Industry and Trade’s Department ofIndustry, stated that the support industry is one of the most decisive factorsfor the prices of locally manufactured or assembled cars. However, a weak-performingsupport industry has made Vietnam’s automobile production costs higher than thoseof imported ones from other ASEAN countries from 10-20 percent.
Toan said themarket capacity was limited by auto assemblers and many different models, whichmakes it difficult for automakers and part producers to invest in developingproduction.
DeputyGeneral Director of Toyota Motor Vietnam (TMV) Shinjiro Kajikawa said that themarket scale plays an important role in the development of the auto sector andsupport industry.
However,the Vietnamese automobile market scale is quite small, he said, adding that under300,000 units of different models are sold each year. The scale is just one-tenthof the Thai market and one-fourth of the Indonesian market.
He stressedthat the Vietnamese automobile market has not had stable regulations, leavinginvestors hesitant and keeping domestic production low.
To expand the localisation rate, he suggestedthe Vietnamese Government consider effective policies to reduce investmentcosts and launch a concerted policy system, especially in taxation policies.
Toan underlined the need to improve thecapacity of enterprises operating in the support industry so as to meet the requirementsof the global production chain.
He proposed the formation of a preferentialcredit package, similar to the one to develop high-tech agriculture, to developthe support industry for the automobile sector, as well as the establishment ofindustrial support centres to attract foreign investment, especially from theworld’s leading spare parts manufacturers. –VNA
VNA
