The information of cars sold at less than US$10,000 each has attracted the attention of Vietnamese consumers. However, several companies had the intention to investing in this market segment but abandoned their plans. They fear that when Vietnam enters the WTO, the import tax will fall sharply and cheap cars will be swept away from the market.
In May, TMT Co. under the Vietnam Motors Industry (Vinamotor) elatedly carried out the US$10-million investment plan for manufacturing four-seat sedans with a Chinese carmaker. The Tidy sedan, which has 1.0L or 1.3L cylinder capacity, was estimated to be sold at $10,000 each. “The plan broke into pieces. When Vietnam joins the WTO, how we can sell them?,” Nguyen Van Khoa, Chairman of Vinamotor, asked.
Apart from Vinamotor, the emerging carmaker VinaXuki also postponed the plan to assemble and manufacture four-seat cars with Chinese components, which hoped to be sold at VND176 million (US$11,000). A senior sales manager of the company said “The import tax rate on finished cars and components is changeable; we should not be venturesome.”
Leaders of Truong Hai Auto said firmly: “There is no longer any intention of making cheap sedans; efforts will be focused on trucks first.”
Although Vietnam has not officially announced the contents of WTO admission commitments, many companies have known information about the finished automobile import tax reduction to 50 per cent in 2010. If Vietnam applies tariff commitments with the ASEAN, the auto import tax only stands at 0-5 per cent in 2015.
A specialist of the Vietnam Society of Automotive Engineers calculates the car assembly requires a new production line, not the old one. And, the factory takes at least two years to begin operation and additional three years to evaluate the car quality. Such a long time concurs with the tax cut schedule. Once the tax falls, the car price will be quite attractive. Furthermore, a Vietnamese person is willing to pay a handsome amount of money to buy a high quality car to show off his wealth.
The sharp fall in car tax is also based on the intention of no Chinese automakers to invest in Vietnam. In the WTO entry negotiation with China, Vietnam allows Chinese companies to set up joint ventures or wholly Chinese-invested projects to make passenger cars.
The domestic car market is likely to see fierce competition; hence, carmakers must reduce prices, increase product quality and find more markets.
Mr. Bui Ngoc Huyen, Director of VinaXuki, said his company has invested nearly US$20 million into a mould manufacturing workshop and a modern shaping system. The company has manufactured cabins, bodies and chassis at a price that some 40 per cent lower than the imports.
Huyen also entertained a plan to build an engine factory with an annual capacity of 50,000 units. He and his associates have made many surveys in Germany for acquisition of modern technologies. The VND1,800-2,000-billion (US$113-125 million) factory will manufacture engines for trucks and 8-seat cars. “If the domestic market cannot use up, we will export,” the director said.
After giving up on its sedan production plan, Vinamotor will focus on improving quality of buses and trucks. The corporation is negotiating with several partners to invest abroad. “The corporation has exported 40 buses to Africa and the remaining 40 buses have not been shipped due to high freight costs. Overseas investment will save shipping costs and is another way to expand the market,” Vinamotor Chairman Khoa said.
Ngo Van Tru, General Director of the Mechanics, Metallurgy and Chemical Department under the Ministry of Industry, said only companies with well-prepared investment plan, modern technology transfer and high quality products will survive.
V.P
Vietnamese
