Auto Industry Bankruptcy: No Growth

The auto industry once had high hopes. But now, many people have to admit that the industry has… completely failed!

- After 20 years of construction and development and 10 years of implementation according to the plan, up to now, the domestic automobile industry has not been able to take shape, only pure processing and assembly.

Pure... assembly

If we take the “regular” 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 the Vietnamese automobile industry to 2010, with a vision to 2020, it has been nearly 10 years. Not to mention, the 10 years before that, the work of building and developing the automobile industry was also carried out by ministries and branches with a lot of effort and money, with the determination to quickly realize the industry with the automobile brand “made in Vietnam”.

However, up to now, the construction and development of the Vietnamese automobile industry to become an important industry of the country by 2020, capable of meeting the highest level of domestic market demand and participating in regional and world markets" in the spirit of the planning project has failed.

The latest data from the Department of Heavy Industry (Ministry of Industry and Trade) shows that, up to now, there are 18 FDI enterprises and 38 domestic enterprises participating in automobile production and assembly with a capacity of about 460,000 vehicles/year, of which passenger cars include 200,000 vehicles/year, trucks 215,000 vehicles/year... Overall, the automobile industry has met domestic demand according to the set target in terms of quantity (domestic production and assembly vehicles and imported vehicles).

On the other hand, a supporting industry has initially been formed, providing some spare parts for domestic automobile production and assembly. Each year, the automobile industry contributes an average of more than 1 billion USD in tax revenue and creates jobs for about 80,000 workers. However, as commented by Mr. Nguyen Manh Quan, Department of Heavy Industry, the automobile industry has not yet achieved the real criteria, only at the assembly level with a production line mainly consisting of 3 main stages: welding, paint cleaning and assembly.

Lack of strategic definition

The localization rate is low. The target set by the planning in 2005 was 40%, in 2010 (60%) for popular vehicles, but so far it has only reached an average of about 7% - 10%. In addition, the supporting industry serving the automobile industry is also very weak. With the planning target, the domestic production rate for engines and gearboxes was 50% - 90% in 2010, but so far it has not been achieved.

Although the number of enterprises participating in Vietnam's auto support industry is about 210, they are mainly small and medium-sized and can only produce a few types of simple spare parts with low technology content such as mirrors, glass, seats, wiring harnesses, batteries, plastic products, etc. These factors lead to the cost of car production in Vietnam being about 20% higher than in ASEAN countries and the highest price in the world due to low output, most assembly lines only operate at 50% capacity, pushing up costs.

The development of the automobile industry is still weak and has not met expectations because the perspective of rapid development and some important goals such as achieving localization rate, consumption market, low price... are still subjective. The difficulties in developing transport infrastructure and the complexity of the domestic automobile market have not been fully anticipated. For example, according to the plan, by 2010, consumption will reach 240,000 vehicles, but so far it has only reached 140,000 vehicles.

On the other hand, both management agencies and enterprises have not fully recognized the importance of supporting industries, in which the legal corridor and policy mechanisms for developing supporting industries in general and for the automobile industry in particular are slow to be issued. In addition, the planning mentions a number of incentives, but the implementation of the policies is limited.

In fact, the domestic automobile market is still too small at this point. Domestic production and assembly output is not much. Therefore, investing or calling for investment in the production of spare parts and components for automobile production and assembly is not attractive because it is difficult to bring efficiency. Even when exporting spare parts to countries in the region, enterprises investing in Vietnam have little competitive advantage because the majority of raw materials and main materials are not produced domestically.

In particular, the tax and fee policy mechanism is unstable and spread out, not really creating an effective tool to stimulate the development of the automobile industry. For example, for passenger cars, there are currently 3 types of taxes and 5 types of fees and charges applied, which have contributed to limiting the purchasing power of cars.

According to Saigon Giai Phong-PH