The Vietnamese auto market has become more competitive and each carmaker is trying its best to affirm its foothold in the market. Apart from manufacturing and assembling sedans, Vidamco also produces buses for export. Vidamco is actively heightening the local parts ratio in its cars and will have to 20 per cent local parts by the end of this year which will rise to 40 per cent by 2007. If this target is reached, Vidamco will fulfil the localisation target set by the Vietnamese government three years ahead of schedule.
To reach the target, Vidamco will have to make full use of its components sourced from local firms. The company will also call for car parts manufacturers from the Republic of Korea to invest in making parts and engines in Vietnam. Mr. Jung-In-Kim, general director of Vidamco, said Vidamco has so far worked with 60 domestic car parts suppliers and has sourced parts from eight of them. Vidamco has also invited more than 30 car parts suppliers from the Republic of Korea and other nations to build factories in Vietnam.
He said the auto industry is a very special one. Each car has more than 20,000 components. The Vietnamese automobile market is too small for operational carmakers to build supportive industries. As a result, importing components for assembly is inevitable. Furthermore, taxation policies on localization are not unified. For example, the exhaust is classified as a part of an engine and it is levied an import tariff of 25 per cent but when an enterprise wants to import separate parts to make exhausts it has to pay a import tax rate of up to 40 per cent. Several enterprises had the intention of to making exhausts but after weighing on the pros and cons they decided against it. In order to realize the localisation target, Vidamco had to accept that it must spend more money than imports, except for several items. This means that the higher the localisation rate is, the more losses an enterprise suffers.
According to expertise speculations, the special consumption tax will be reduced to 20 per cent in the next three years. At that time, if customs offices fail to realise what the real prices of imported items are and what are unacceptable prices, imported cars will be more competitive although local consumers can still buy cheaper locally made cars. This will lead to the unwanted distinction of the fledging auto industry because no investors are daring enough to invest in the car industry. “Therefore, right from this time, administrators need to introduce timely policies to support our young auto industry in order to develop steadily,” Mr. Jung-In-Kim stressed.
“The objective of Vidamco is to change the habits of Vietnamese people from using two-wheelers to the four-wheelers. By 2020, annual per capita income is estimated to reach US$3,000 and each family will have a GM Daewoo car,” Mr. Jung-In-Kim affirmed.
With its advantages, Vidamco has always taken the lead in selling sedans since 1999. In 2004 alone, Vidamco sold 5,112 sedans, accounting for 33 per cent of the sedan market segment. In the first eight months of 2005, Vidamco sold more than 3,000 cars, including 1,000 Lacetti sedans.
Kim Phuong
Vietnamese
