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Last updated: Tuesday, November 20, 2018

 

Vietnamese Auto Industry: Stronger Growth

Posted: Wednesday, November 07, 2018


Vietnam's automobile industry has developed in the past two years, Deputy Prime Minister Truong Hoa Binh said in a joint statement on implementation of resolutions on National Assembly’s questions.

The government’s integrated report on implementation of resolutions of the National Assembly of Vietnam on specialised monitoring and questioning from the start of this term to the end of the fourth meeting of the National Assembly was presented by Deputy Prime Minister Truong Hoa Binh.

He reported on sector-specific performances, including the industrial and commercial sector, with the requirement of a growing automotive industry.

Deputy Prime Minister Binh said that, in order to develop Vietnam's automobile industry, the Government issued Decree 116/2017/ND-CP dated October 17, 2017 on conditions for automobile production, assembly, import, warranty service and maintenance. The Prime Minister demanded the establishment of an interagency working group in charge of assessing the implementation of the Vietnamese automobile industry development strategy and plan. The working group worked with automakers, looked into the production development plans of each company in the 2018 - 2020 period, studied their hardships and recommendations, and proposed solutions to troubleshooting and business support.

The Vietnamese automobile industry has developed more in the past two years, Deputy Prime Minister Binh stressed.

The other information stated in the report is developing major mechanical products. The Prime Minister issued Decision 319/QD-TTg dated March 15, 2018, approving the Vietnam mechanical industry development strategy to 2025, with a vision to 2035, with a list of key mechanical products prioritised for development investment from 2017 to 2025.

The Government and the Prime Minister repeatedly requested the Ministry of Industry and Trade to work with relevant bodies to evaluate the sector development plan and strategy, the report said.

Also submitted by the Government to the National Assembly, separate reports on industry and trade provide more detailed information on the implementation of the development plans of the automobile industry and key mechanical products.

To demonstrate Vietnam's rapid automobile industry development in the past two years, this report stated that, domestic automotive production and assembly output exceeded 200,000 vehicles in 2015 for the first time, an increase of 51 per cent over 2014. The output continued to increase strongly in 2016, reaching over 283,300 units. Some types of products have been exported to Laos, Cambodia, Myanmar and Central America. The automobile industry paid billions of US dollars of taxes to the State budget and helped narrow the trade deficit. The sector also created direct employment for more than 120,000 workers.

In 2018, the domestic automobile industry has about 173 manufacturing and assembling enterprises, including 56 units making vehicles from separate parts and 117 units making base vehicles. Most of them are medium and small in size. Some domestic firms have joined global automotive production chains. Total installed capacity is about 500,000 units per year, of which foreign-invested makers account for about 47 per cent while domestic firms account for about 53 per cent.

Big makers can meet about 70 per cent of domestic demand, with total production of 210,000 vehicles in 2016, including 160,000 sedans.

Trucks, passenger vehicles of 10 seats or more and special-purpose vehicles have high localisation rates and basically meet domestic market demand. Small trucks of 7 tonnes meet about 70 per cent of the demand and contain 50 per cent of locally made contents, passenger vehicles of 10 seats or more and specialised vehicles meet about 90 per cent of the demand and reach localisation rates of 45 - 50 per cent, in excess of planned targets.

However, the Government also noted a number of limitations such as weak cooperation and specialisation among automakers and parts manufacturers.

Therefore, in the coming time, domestic automakers will need effective solutions to raise the localisation rate and strengthen the cooperation between domestic and foreign manufacturers in component production, with a focus placed on important high-tech components like engines, gearboxes and actuators to serve domestic needs, replace imports and export to other countries.

As for the localisation rate in personal cars of up to 9 seats, the targets are 40 per cent in 2005 and 60 per cent in 2010, but the current actual rate is only 7 - 10 per cent. Among notable makers, Thaco reported to reach 15 - 18 per cent and Toyota Vietnam reached 37 per cent for Innova line, lower than the targets. Locally made products typically have low technological content such as inner tubes, tyres, seats, mirrors, glass, wires, batteries and plastic components. Up to 80 - 90 per cent of core inputs for component production such as alloy steel, alloy aluminium, plastic resin and high-tech rubber are now imported. Moulding materials must also be imported. Annually, enterprises have to import about US$2 - 3.5 billion of components and spare parts for production, assembly and repair of vehicles.

According to the Government, the weak capacity of parts suppliers is also noteworthy. Mould makers either do not have a large scale or lack coordination for development.

At present, the average localisation rate in other countries in the region has reached 65 - 70 per cent, Thailand topping the list at 80 per cent. For that reason, if domestic carmakers do not soon have effective solutions to improve their localisation rate, they will certainly have difficulty competing with regional rivals when the AFTA pact takes effect, the Government noted.

PV








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