New Motivation for Auto Industry

This will change as lately Prime Minister has signed a decision to promulgate a list of industrial products supported and given priority for development, of which there are many auto industrial products. Many experts and businesses confirm that this is seen as a new motivation for the development of this industry.

The Prime Minister Nguyen Tan Dung has signed Decision 1483/QD - TTg promulgating the list of industrial products supported and given priority for development, of which auto industrial products are publicly evaluated to have already met the specifications, creating the conditions for intensive development of many sectors.

The auto industry has promoted the category of industrial products needing support, and with this will achieve the goal of improving the localization rate - one problem which stubbornly remains in spite of many efforts to address it.

Accordingly, the auto manufacturing and assembly sector has a series of groups of products given priorities for development, including engines and engine details, lubrication systems, cooling systems, fuel supplying systems, frame - body - doors, suspension systems, wheels, drive trains, steering, brakes and electrical/electronic components, systems of lighting and signals, auto exhaust gas treatment systems, plastic components for autos, rubber components, and shock absorbers. Besides, the sectors and branches related to cars such as mechanical engineering sector has five product groups, including moulds and fixtures, tools - knives, spare parts for mechanical machines and welding machines, measuring and testing instruments used in mechanical engineering, and machine parts.

The projects manufacturing products in this list may be eligible for appropriate assistance as stipulated in Decision 12/2011/QD-TTg dated on 24/02/2011 of the Prime Minister on the policy for development of some support industries. Specifically, the government will create conditions for domestic and foreign organisations and individuals to invest in the development of support industries, and to encourage developing markets, infrastructure, scientific and technological support, human resource training and financial support.

According to Mr Du Quoc Thinh, General Secretary of Vietnam Association of Automobile Engineers, the introduction of 15 groups of auto industrial products for development priority will enable most businesses to seize the opportunity because, beyond key components, this category also gives priority to those not so difficult items like frame, car tires, and doors. Currently there have already many businesses grasping this opportunity, including the production of the engine as Truong Hai and Hyundai. In addition to the direct production, these types of projects themselves will create conditions for many domestic and foreign spare parts-manufacturing businesses to invest more dramatically in Vietnam. And so, according to many experts and businesses, assistance should be more concrete, but it must depend on the specific groups of products; the more difficult ones with the bigger capital investment should be given more preferences. Besides, the decision to give preferences at this time will help attract more foreign businesses to invest in the field of manufacturing auto spare parts and components in Vietnam. Thus, investment in Vietnam will have more advantages compared with other countries in the region.

However, many professionals and businesses said that is still difficult to take advantage of this opportunity, especially for domestic small and medium-sized businesses. There are many reasons, but this argument is based on two factors: First, the duration from now until 2018, when the tax rates imposed on importing cars and auto spare parts in Asean countries have been sharply decreased towards zero rates, is not so long. And if they invest heavily in these groups of product, especially with limited experience, it will be difficult for them to compete. Second, many domestic auto companies themselves are not keen on using products, components, and spare parts manufactured by domestic companies (They mostly use the components and details within their systems, businesses now located mainly in countries like Thailand and China). This means that the consumption market is small, even very small. That's not to mention issues of quality and price. So, in addition to the priority, expanding the market must be carried out urgently, not only businesses but also our Government should join hands and contribute their efforts. With the above priorities, it is likely that there will be businesses grasping opportunities, and developing strongly, and that will be great motivation for developing the auto industry.