The automotive industry has not lived up to expectations

06/05/2022

The automotive industry is considered to be one of the leading industries, leading the development of other industries.Over the years, Vietnam’s automobile industry has made “moves” but has not really lived up to expectations. In order for the development of this industry to be a positive factor in promoting the development of related industries, more solutions are needed.

Localization rates remain low

According to the Ministry of Industry and Trade, since its creation, the Vietnamese automobile industry has made a long step forward. Significantly, trucks and passenger cars with 10 seats or more, specialized vehicles have high localization rate, meeting the target for the domestic market (trucks up to 7 tons meet about 70% of demand, with an average localization rate of 55%; passenger cars with 10 seats or more, specialized vehicles meet about 90% of demand, with a localization rate of 20% to 50%). Along with this, the number of enterprises operating in the automotive industry and supporting industries for the automotive industry has increased continuously, so far there are about 260 enterprises, of all economic sectors, especially the private enterprise sector.

However, according to Deputy Director of the Department of Industry (Ministry of Industry and Trade) Pham Tuan Anh, overall, automobile manufacturing and assembly has not yet met the criteria of the automobile manufacturing industry; not yet created cooperation – linkage and specialization among enterprises in automobile manufacturing and assembly and parts and components manufacturing. A large-scale system of suppliers of raw materials and components has not yet been established and especially the selling price of vehicles remains high compared to other countries in the region.

Although there has been an increase in the past time, industrial enterprises supporting the Vietnamese automobile industry have grown both quantitatively and qualitatively behind many countries in the region. Only a few local suppliers can participate in the supply chain of automobile manufacturers and assemblers in Vietnam. Specifically, while Thailand has nearly 700 level 1 suppliers, Vietnam only has less than 100. Thailand has about 1,700 level 2 and 3 suppliers, while Vietnam only has less than 150 suppliers. Along with this, the localization rate for personal vehicles up to 9 seats is still low. The target is 30-40% by 2020, 40-45% by 2025 and 50-55% by 2030, but so far the average is about 7-10%. In particular, Thaco reached 15-18%, Toyota Vietnam reached 37% for the Innova line alone (according to information from enterprises). The localization rate is also much lower than Thailand, Indonesia and Malaysia…

Propose a variety of solutions for development

According to the economic experts, the major difficulty for enterprises making automobiles “Made in Vietnam” is competitiveness. Dr. Truong Thi Chi Binh, Vice Chairman, General Secretary of Vietnam Supporting Industry Association, said that the reason why enterprises are difficult to develop is low domestic car production, unable to attract investors because they do not bring attractive profits. At the same time, the policies of support and incentives for the automobile industry are not strong enough. This leads to higher costs of manufacturing tourist cars in Vietnam than in Southeast Asian countries, on average about 20%, which is difficult to compete with imported cars, especially from Thailand, Malaysia or Indonesia.

The Ministry of Industry and Trade forecasts that Vietnam’s automobile demand in 2025 could increase to around 800,000-900,000 vehicles and by 2030 around 1.5-1.8 million vehicles. These are extremely attractive numbers, making Vietnam’s market the destination of many car manufacturers in the world. In the face of opportunities and challenges, Mr. Le Anh Tu, Institute for Strategic Research on Trade and Industry Policy (Ministry of Industry and Trade) proposed that the State should continue to support the automobile manufacturing industry with tax policies for high-tech enterprises with large localization rates. Along with this is a policy to encourage industrial development to support the production of components and spare parts according to international standards and prioritize investment in the transportation system. As the market grows rapidly, the business will continue to invest well, on a large scale.

Currently, the Ministry of Industry and Trade proposes to continue to maintain the Preferential Program for Import Tariff Rates of Components and Parts for Automobile Manufacturing and Assembly and the Preferential Program for Import Tariff Rates for Raw Materials and Materials for Production of Supporting Industrial Products. Along with that, the Ministry proposes to amend and supplement the regulations on excise duty in the direction of incentives for cars along with the conditions for enterprises to improve output and value-added generated in the country.

Along with that, the Ministry of Industry and Trade persists in promoting green development, which one of the highlights is to encourage the use of green and environmentally friendly vehicles. Currently, the Ministry is studying to propose policies on excise duties for electric cars and environmentally friendly vehicles.

Source: Bao Ha Noi Moi

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