Daihatsu - "High Taxation Rates not Solve Problem of Auto Manufacturing Localisation"

Vietnam Business Forum (VIB FORUM) conducted an interview with Mr. Kimikazu Mitsuhashi, General Director of Vietindo Daihatsu Automotive Corporation

 

Established in April 1995, VINDACO is joint venture between Daihatsu Motor Co., Ltd (Japan) and Vietnam Motor Industry Corporation (VINAMOTOR). We are a well-known worldwide company producting trucks and small cars. Daihatsu stands in 5^th place on the motor manufacturer Japanese market after Toyota, Nissan, Honda and Suzuki.

 

Recognizing the potential of Vietnam’s auto market, we invested US$12.129 million in our assembling plant. Over the 10 past year operation we have marketed 5,000 cars. Meanwhile, the total income in 2005 was not good. We sold only 450 units compared to 800 units in 2004

 

In my opinion, the important reason is extremely slow market because of customer’s are waiting to see the attitude anticipating the car price decrease in future. 

 

Although the import tax for CKD is set lower than for complete cars, a high rate is applied for Special Consumption Tax for passenger car since 2004, as a result, the price per car is much higher. Customers think always that we, car makers, have so much profit but in the fact, they must pay for tax. According to our figures, Vietnamese customers have to pay 45 per cent more for a Daihatsu car higher than Japanese customers do. Meanwhile, Vietnam is still a small market for cars, increase in tax rates for locally produced cars, alone, would not solve problem of low localization ratio.

 

For instance, if we are to invest US$500,000 for tooling for the localization of a component parts, you can imagine how different the piece cost will be when such investment is depreciated by 10,000 units or depreciated by only 1,000 units. Car consists from thousands of those components. Therefore, the volume holds the key for the localization.

 

 As a local car manufacture, we really want to step up the localization, however, it will much depend upon the market volume, as mentioned before. At the same time we must understand that the market volume of Vietnam has to be developed in harmonization with the development of infra-structure, avoiding the traffic problems and environmental problems. 

 

Therefore, the necessity of close mutual cooperation between the manufactures and the Authorities, to find a practical and strategic solution to realize the development of the local manufacturing industry, is becoming more and more important.

 

With such cooperation we believe Vietnam auto market and industry can develop stably in the long term.