The automotive industry is going bankrupt: Never growing.

The automotive industry once generated high expectations. However, many now acknowledge it as a complete failure!

- After 20 years of construction and development, and 10 years of implementing the plan, the domestic automotive industry has yet to take shape, remaining purely focused on assembly and processing.

Purely... assembly

If we take the "official" milestone, from the time the Prime Minister signed Decision No. 177/2004/QD-TTg on October 5, 2004, approving the Plan for the Development of Vietnam's Automobile Industry until 2010, with a vision to 2020, it has been almost 10 years. Not to mention, 10 years prior to that, the construction and development of the automobile industry was also carried out by various ministries and agencies with considerable effort and resources, determined to quickly achieve the goal of a "made in Vietnam" automobile industry.

However, the goal of building and developing Vietnam's automotive industry to become a key national industry by 2020, capable of meeting the highest domestic market demand and participating in regional and global markets, as envisioned in the planning project, has now failed.

The latest figures from the Heavy Industry Department (Ministry of Industry and Trade) show that, as of now, there are 18 FDI enterprises and 38 domestic enterprises involved in automobile production and assembly with a capacity of approximately 460,000 vehicles per year, including 200,000 passenger cars and 215,000 trucks. Overall, the automotive industry has met domestic demand according to the set targets in terms of quantity (domestically produced and assembled vehicles and imports).

On the other hand, an initial supporting industry has been formed, supplying some parts for domestic automobile production and assembly. Each year, the automotive industry contributes an average of over $1 billion in tax revenue and provides employment for approximately 80,000 workers. However, as noted by Mr. Nguyen Manh Quan, Head of the Heavy Industry Department, the automotive industry has not yet truly reached its full potential, remaining at the assembly stage with production lines primarily consisting of three main stages: welding, paint cleaning, and assembly.

Lack of strategic direction

The localization rate is low. The plan's target for 2005 was 40%, and for 2010 (60%) for common vehicle types, but to date, it has only reached an average of about 7% - 10%. Furthermore, the supporting industries for the automotive industry are also very weak. The plan aimed for a domestic production rate of 50% - 90% for engines and gearboxes by 2010, but this has not yet been achieved.

Although Vietnam's automotive supporting industry currently has around 210 enterprises, they are mostly small and medium-sized and only produce a limited number of simple, low-tech parts such as mirrors, glass, seats, wiring harnesses, batteries, and plastic products. These factors lead to the production cost of automobiles in Vietnam being about 20% higher than in other ASEAN countries and among the highest in the world due to low production volume; most assembly lines operate at only 50% capacity, driving up costs.

The development of the automotive industry has been weak and has not met expectations due to a focus on rapid growth and subjective goals such as achieving localization rates, market demand, and low production costs. Difficulties related to developing transportation infrastructure and the complexity of the domestic automotive market have not been fully anticipated. For example, the plan aimed for 240,000 vehicles sold by 2010, but only 140,000 have been achieved so far.

On the other hand, neither the regulatory authorities nor businesses have fully recognized the importance of supporting industries. The legal framework and policy mechanisms for developing supporting industries in general, and the automotive industry in particular, have been slow to be enacted. Furthermore, while the planning mentions some incentives, the implementation of these policies is limited.

In reality, the domestic automotive market remains very small. Domestic production and assembly output is limited. Therefore, investing in or attracting investment in the production of parts and components for automotive manufacturing and assembly is unattractive due to the difficulty in achieving profitability. Even exporting parts to other countries in the region, Vietnamese businesses have little competitive advantage because most of the main raw materials are not produced domestically.

In particular, the tax and fee policy mechanisms are unstable, fragmented, and have not truly become effective tools to stimulate the development of the automotive industry. For example, passenger cars currently have 3 types of taxes and 5 types of fees and charges applied, which have contributed to limiting car purchasing power.

According to Saigon Liberation-PH