Sour auto industry

In a recent press conference, the General Director of Toyota Vietnam (TMV) gave information that, although not new, was quite sensitive and caused turmoil in the automobile market.

Illustration photo. Internet photo.

That is, the largest automobile manufacturing joint venture in Vietnam is still very hesitant between having to quickly make a decision to continue investing in automobile production in Vietnam or turning to importing completely built-up cars. This leader also admitted: With the current reality, according to the roadmap by 2018, the import tax on completely built-up cars in the region will be reduced to 0%, at that time, domestic production will not be competitive and importing completely built-up cars is the most profitable solution.

Being a rather cautious person in his statements, it seems that the head of TMV did not say anything out of turn. This information is no longer given as a warning, but as a very real confession about the “unfinished” situation in the investment problem in the automobile manufacturing industry in Vietnam, not only for TMV but also for many other automobile companies.

Let me say that businesses that have invested quite a bit in automobile assembly and production such as TMV, Mercedes-Benz, Ford Vietnam, GM Vietnam, Truong Hai... prefer to manufacture rather than import complete units.

First of all, it is the 15-20 year period of "pursuit" in Vietnam, and the large sums of money invested (TMV spent 154 million USD; Ford Vietnam 125 million USD, Mercedes-Benz about 80 million USD...).

Second, more importantly, assembling a car will be much more profitable than importing a complete car. Not to mention that if importing a complete car, the level of competition will be very high, the market will be fragmented, and joint ventures such as TMV (currently holding 31% of the market share), Mercedes-Benz, Ford Vietnam... will no longer have the advantage of dominating a large portion of the market share as they do now. The amount of products sold and profits will not be as high as they are now.

However, with the high import tax reduction roadmap, the current state of the weak supporting industry, and low localization rate, of course domestic assembly production will not be able to compete with imported products from countries in the region, especially from automobile manufacturing "powerhouses" such as Thailand, Malaysia, Indonesia...

So the message given by automobile enterprises is “we are waiting” – waiting for specific decisions from the Government to support the development of domestic production after the recently approved Strategy for the Development of the Vietnamese Automobile Industry to 2025, with a vision to 2035.

But what are you waiting for? The first half of 2015 is almost over, and 2018 is approaching, so there is not much time left for businesses to “turn around”. If they only import complete units, production is reduced and stopped, this is indeed a bitter result for the history of the automobile industry over the past decades.

According to VnMedia