Should 40% localized cars be considered strategic cars?

To be able to "run" in time for the tariff reduction schedule, Vietnam should consider domestically assembled cars with a localization rate of 40% or more as strategic vehicles.

Previously, the Ministry of Industry and Trade proposed planning 9-seat vehicles with cylinder capacity under 1.5 liters as strategic vehicles to enjoy preferential policies.

That is the viewpoint of the European Chamber of Commerce in Vietnam (EuroCham) stated in the 2014 White Book on trade and investment issues regarding the orientation and development plan of the Vietnamese automobile industry from now until 2018.

According to this agency, strategic vehicles do not necessarily have to be classified by type, but only need to have a high localization rate, enough to enjoy preferential policies and be competitive with imported vehicles. It can be a passenger car with 5 seats or less, a multi-purpose vehicle, a truck or a bus.

A 2013 report by the Ministry of Industry and Trade said that the localization rate in the Vietnamese automobile industry has increased from 7% to 10% for passenger cars, and from 35% to 40% for heavy trucks.

Regarding these rates, EuroCham believes that they are still too low compared to the targets set by the previous Vietnam auto industry development strategy of reaching 40% by 2005 and 60% by 2010.

Why is localization so important? EuroCham pointed out the fact that Vietnam has been an active member of ASEAN and this bloc has signed 3 trade agreements with 3 countries outside the bloc: China, Korea and Japan (abbreviated as ATIGA Agreement). According to these agreements, preferential policies on tax and investment are only given to domestically assembled cars with a localization rate of 40% or more.

Meanwhile, also according to the ATIGA agreements, the roadmap for tariff reduction on imported cars from member countries will decrease very quickly and by 2018, the common rate will be 5%, only slightly higher than imported cars from ASEAN member countries (0%).

As VnEconomy has mentioned in previous articles, the concern for the domestic auto industry because imported cars from China, Korea and Japan are actually much greater than imported cars from ASEAN countries. Because these are the 3 countries with the world's leading auto industry. Customs statistics also show that in the past year, imported cars from these 3 countries have always accounted for an overwhelming proportion and are increasing strongly.

In more detail, according to statistics from the General Department of Customs (Ministry of Finance), the total number of imported cars in the first 10 months of 2013 reached 28,647 units with a turnover value of nearly 551 million USD. Of which, the number of imported cars from the 3 countries signing the ATIGA Agreement accounted for 17,341 units with a turnover value of more than 309 million USD.

If we count all imported cars from ASEAN+ (ASEAN and China, Korea, Japan), the number is even larger, with 25,357 cars and over 445 million USD.

Obviously, the pressure from imported cars from these countries is extremely large and according to EuroCham, "the Vietnamese auto industry has very little time to consolidate its position and stand firm in the market".

And if determined according to the above viewpoint, "tax incentives should also be applied immediately for the 2014-2018 period so that the assembly industry has time to shape and restructure", the 2014 White Book proposed.

According to thoibaokinhte