Auto Industry Heavily Dependent on Internal Resources of Businesses

Reports on the auto industry have shown, year after year, that the industry is still weak and immature.

 

Is this true? Considering the overall realistic perspective, compared with many countries in the region and the world, it is right, but it is also just a matter of "thinking inside the box" without a detailed consideration of the advantages, as well as specific solutions for exploiting the advantages (thinking in terms of the problem).

 

Over one year ago, at a seminar on the auto industry held in Chu Lai Economic Zone, the Ministry of Industry and Trade released a report saying that among the targets set in the planning, only the export of components and spare parts was reached; the other targets, including car production output and the rate of localisation, were not achieved. The important goals reflecting the development of the auto industry, such as production of engines, gearboxes and transmissions, were missed.

 

In particular, production of automobile accessories is also underdeveloped. Until now, there have been about 210 companies involved in the production of components and auto parts, but the main products are simple components, requiring less technological know-how and offering low value in the product structure. This is true, but it is also notable that until the present time there is no plan or solution for this failure. Even the specific issues in the report need to be questioned: for example, is it true that only 210 enterprises are involved in the production of components and spare parts with simple technology know-how? Are the 210 participating companies 100 percent Vietnamese owned companies or foreign firms? Do they provide products for the domestic automobile industry or for exports? In export sales of components and auto parts, which companies among the 210 have export products? And it should be noted that, as in the article in the Vietnam Business Forum newspaper, “A perspective for the automobile industry," exports of vehicles and automotive parts and components are in Vietnam’s Top 10 exports, up to $ 3.37 billion in the first 9 months of 2012. Although the auto industry is still young, poor and cannot produce all the components and spare parts of automobiles (which is impossible), clearly, the advantage of exporting spare parts should be given more attention. We should find and implement other solutions when targets are not reached, encouraging additional approaches to promote our advantages. That is the problem that the authorities have not dealt with and which still depends on the operational plans of each company.

 

In a recent workshop on the automobile industry development in the framework of Vietnam Motorshow 2012, most reviews said it is important for the industry to get involved in the global value chain and try not to think in package style that they can do it all. The export of components and spare parts is a testament to this. This is true, but the specific solutions have not been mentioned. Finally, each business has to find its own way and do what they do best. The export of components and auto parts in recent years mainly depends on the internal force and the willingness of each company. Most auto spare parts export businesses have collaborative relationships with automobile joint ventures in Vietnam such as Toyota, Ford, Honda ... or some part of that company's global production system. And investment decisions in the production of components and spare parts export are based on the demand, or the direct decisions of, these firms; they are rarely independent and proactive in terms of business incentives calling for investment in supporting industries. The question for these businesses when investing in Vietnam is who are they supporting? Of course, it is not manufacturing companies and assembling companies in the country, they only invest in supporting industries for export. It is true that the general method of development of the automobile industry so far is to participate in the value chain of global production and supply.

 

So, in addition to the efforts of each company, specific and detailed policies from the essential management agencies are necessary for this inevitable development of the automobile industry.