Vietnam Heads to Auto Auxiliary Industry

3:26:38 PM | 7/8/2005

Vietnam Heads to Auto Auxiliary Industry

VIB Forum conducted an interview with Ass.Prof.Dr. Phan Dang Tuat, Head of Institute of Industry Policy and Strategy Research, Ministry of Industry.

Could you give a brief introduction to “auxiliary industry” in auto manufacturing in Vietnam?

The auxiliary industry for auto manufacturing has received a pledge from the Government on maximum priority. It includes various areas, specifically the production of components and spare parts for automobile and motorbike assembly, fuel and supportive equipment, machines, technologies, repair and maintenance equipment. I want to stress that that the priority for the development of this industry is aimed at increasing the localization rate of the domestic automobile industry. Specific targets are: 50 percent for ordinary automobiles by 2005 and 80 percent by 2010; 40 percent for specialized automobiles by 2005 and 60 percent by 2010; 20 percent for lorry and bus by 2005 and 35-40 percent by 2010. At present, the Government is encouraging all forms of investment in and production cooperation of auto spare parts, especially engine components; focus on the development of popular, specialized and high-class automobiles. The Government will gradually reduce or exempt import taxes on materials and components of key mechanical products for local consumption.

Why do we need to develop this industry in Vietnam?

Currently, the auto auxiliary industry in Vietnam meets just 12-20 percent of the market share, which is seen as low both in production capacity and technology. In addition, almost all enterprises in auxiliary industry are of small scale, limited capital, and low production capacity and largely depend on the technology of foreign importers. Therefore, we need to combine all of them to enhance their strength. A car could be seen as “Made in Vietnam” if around 40 percent of it is locally manufactured. However, this is extremely difficult since Vietnam’s industry developed from a very low starting point with only 5 percent of localization rate. In my opinion, we can only be able to produce some simple components and spare parts such as tyres and batteries while high-class products (cars) require technologies which are thousands of times higher. At present, all personal automobiles in Vietnam are manufactured mainly by 11 joint ventures.

Without auxiliary industry, we cannot reach a modern and large auto industry, with the manufacturing of buses for instance. Many people have asked me which key point Vietnam will take to develop the auto manufacturing industry. Is it the construction and expansion of transport infrastructure? Or increasing the demand for cars? I have thought of the development of auxiliary industry. We will look forward to raising the output of auto manufacturing. Vietnam’s current average auto consumption is as low as one car per 142 people. This is much lower than that in Malaysia with the rate of one per 4-5 and in Thailand 1 per 10, correspondingly. It is predicted that the demand for cars in Vietnam in 2010 will reach 34,000, buses (63,000), lorries (66,000) and specialized vehicles (6,000). If we do not make thorough preparations correctly now,a shortage crisis will emerge and we will depend heavily on imports. Particularly, some joint ventures begin to complain about Vietnam’s slow development of its auto auxiliary industry. This has curbed their capacity to 30,000-40,000 instead of 130,000-140,000 automobiles per year.

Automobile exhibition plays a crucial role during the development of the auto industry. What’s your opinion about automobile exhibitions held and to be held in Vietnam?

It should be stressed that previous exhibitions were prone too much to the exposure of new car lines with stunning girls, thus attracting more viewers than buyers. The upcoming Vietnam Autoexpo 2005 slated for July 2005 will be totally different from the previous ones as the first registers are enterprises producing plastic and packages. We have thought of displaying auto spare parts and create favorable conditions for interested investors for direct discussion in this exhibition. Besides, enterprises can advertise along the lines of “We want to produce this part and want to invite partnership”. Vietnam Autoexpo will magnetize giant manufacturers with long prestigious trademarks such as Mercedes-Benz, Ford and Mitsubishi, and professional spare part suppliers from around the world.