Automotive Industry: Important Motivation for Economic Development

2:22:39 PM | 8/5/2014

Vietnam is a market of large demand and great advantages for the development of the automotive industry. However in recent years, automotive enterprises have focused only on the assembly, import and distribution sectors. The Vietnam Automotive Industry Development Strategy to 2025, with a vision toward 2035, recently approved by the Prime Minister, offers an opportunity for this industry to grow, motivating economic development.
Enhancing export
The fact is that in recent years, businesses have focused only on assembly, import and sales, while making very few major investments. The Automobile Industry of Vietnam for many years has had only old projects, in terms of both investment and technology.
In terms of export potential, Vietnam completely has the ability for car export. Demonstrating this, a number of big Vietnamese businesses and corporations have successfully produced the complete frames for small cars and some other parts using only internal resources, reaching a localisation rate of over 40 percent and gaining a full advantage to export cars to Southeast Asian countries. Some big names such as Truong Hai, Vinaxuki, etc. have started to expand further than the domestic market and have export plans for the near future.
Notably, automobile import tariffs from the ASEAN countries will be lowered to zero percent by 2018. To enjoy this preferential tax rate when exporting cars to countries in the region, automobile production in Vietnam must achieve the localisation rate of 40 percent or more. This poses a challenge for Vietnamese businesses, but is not unachievable.
The Vietnam Automotive Industry Development to 2025, vision and target toward 2035 has recently been approved. With this new vision, Vietnam will prioritize three groups of products: trucks and buses of from ten seats for rural areas and agricultural production, passenger cars for short and medium distance, which run intercity, interdistrict and interurban; small passenger vehicles of up to nine seats, low power consumption; specialized vehicles such as concrete trucks, tankers, vehicles for security and national defence purposes, and small multifunctional vehicles for agriculture. There are small adjustments, but it’s not too different from the Vietnam Automotive Industry Development to 2010, vision toward 2020.
Vietnam has set a goal: By 2020, the total export volume will reach about 20,000 vehicles, of which vehicles of nine seats and less will contribute about 5,000 units, vehicles of ten seats up about 5000 units, trucks about 10,000 units. The export value of components and spare parts to stay at about US$4 billion; by 2025, total vehicle exports will climb to approximately 37,000 units and 90,000 units in 2035.
Promoting cooperation
In addition to the technological investment and upgrade to improve product quality to meet international standards and boost exports, the automotive industry of Vietnam also needs to promote cooperation, generating focus and enhancing added value.
The strategy also pointed out the necessary to develop internal resources of all sectors in the domestic economy; focusing on cooperation with big automobile manufacturers in the world to develop the automotive industry in sync with the transportation infrastructure, satisfying basic domestic demands of vehicles of competitive advantage, suitable for consumer policy and requirements of environmental protection, energy saving; enhancing competitiveness to become a supplier of components and parts in the production chain of the world automotive industry; boosting the national economic restructuring towards modernisation.
Besides, to raise added value, the industry should also consider forming some kinds of centre/complex of automotive industry on the ground of reorganizing production. It’s also crucial to promote cooperation among businesses of automotive production and assembly, enterprises of support industry, research - implementation facilities and training facilities in all economic sectors to enhance investment efficiency and specialisation ability.
As for support industries, Vietnam should have strategies for accessing and applying technology to make important details and components such as actuators, gearboxes, motors and fenders for some types of cars; strengthening cooperation with major auto-makers to choose components that Vietnam can produce to assume the role in the global production - supply chain, then on that basis, investing more in advanced technology, producing for export.
In particular, Vietnam should identify and establish strategic partnerships, encouraging investment in big projects to create market for support industry; encouraging the production of environmentally friendly vehicles (fuel efficient vehicles, hybrid vehicles, vehicles using biofuels, electric cars).
Before, Vietnam had yet to succeed with the Vietnam Automotive Industry Development to 2010, vision toward 2020. Hopefully, with this new vision extended by 15 years for the development strategy of Vietnam's automobile industry to 2025, with a vision to 2035, Vietnam auto industry will find a new direction and motivation to promote economic development.
Thu Ha