Auto industry struggles with strategic vehicle lines
Many opinions lean towards 16-24 seat passenger vans because they are suitable for public transport and traffic infrastructure.
After nearly 20 years of construction and development, nearly 10 years of implementing the Automobile Industry Development Plan, the localization rate is still very low, the production line mainly consists of 3 main stages: welding, paint cleaning and assembly.
What is the strategic vehicle line?
In the Notice dated December 24, 2013 of the Government Office disseminating the conclusion of the Government's standing meeting on the Strategy and Planning for the development of Vietnam's automobile industry to 2020, with a vision to 2030, the Prime Minister requested relevant agencies to focus on developing multi-purpose small trucks, replacing farm vehicles, homemade vehicles, serving agricultural and rural production and passenger cars... in which the selection of developing specialized and 4-7 seat tourist vehicles should be carefully considered.
Most management agencies agree with this view, because it is consistent with the strategy of industrialization and modernization of rural agriculture and Vietnamese farmers. Meanwhile, the Ministry of Industry and Trade's proposed view is to prioritize light trucks up to 3 tons, and many opinions have suggested that it is necessary to clarify whether 3 tons is the total weight of the vehicle or just the carrying capacity.
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| Many opinions lean towards choosing 16-24 seat passenger vans. (Photo: KT) |
Mr. Luu Duc Huy - Deputy Director of the Tax Policy Department (Ministry of Finance) said that the Government's orientation to develop multi-purpose small trucks to replace farm vehicles, homemade vehicles, serving agricultural and rural production and passenger cars is consistent with the Planning and Strategy for the development of the transport industry, and in line with domestic production capacity.
According to Mr. Vu Quang Tam - Deputy General Director of the General Corporation of Engines and Agricultural Machinery (VEAM), priority should be given to vehicles with a payload of about 1.5 tons (total payload of about 3 tons) because they serve the needs of transporting agricultural products (vegetables, fruits, etc.) of farmers from rural to urban areas.
However, Mr. Tran Ba Duong - Chairman of Truong Hai Automobile Group said that the current demand of the agricultural market requires vehicles with larger payloads, to help people transport large quantities of industrial products such as pepper, cashew, and rubber. Therefore, priority should be given to vehicles with a payload of up to 5 tons (total payload of up to 10 tons).
Even for passenger cars, there are opinions that priority should be given to developing vehicles with 10 to under 24 seats, but there are also opinions that support should only be given to vehicles with 16-24 seats. There are also opinions that priority should be given to supporting vehicles with over 24 seats…
According to Mr. Ngo Van Tru - former member of the drafting board of the Vietnam Automobile Industry Development Strategy, priority should be given to developing personal cars with less than 9 seats, because demand is forecasted to increase after 2020.
Mr. Tru analyzed: When the average income per capita exceeds the threshold of 2,000 USD/person/year, improved traffic infrastructure will be a condition for buyers to be able to use personal cars. At the same time, developing this type of car is also a condition to increase the localization rate, focusing on incentives for the development of the component manufacturing industry to be able to participate in the global value-added chain.
Recently, according to the representative of the Ministry of Industry and Trade, in March 2014, the Government will submit the Automotive Industry Strategy according to the Government's direction. However, until the end of March, there is still no consensus on the viewpoint of prioritizing the development of strategic vehicles.
What is the mechanism for developing the automobile industry?
According to AFTA commitments, by 2018, import tax on completely built-up cars originating from countries in the Southeast Asian region will be reduced to 0%. This also means that the time to accelerate the construction and development of the Vietnamese automobile industry to be competitive enough with 100% imported products is less than 4 years.
Many experts have commented that the door for the Vietnamese automobile industry is considered closed. However, there are still more optimistic views when they say that there is still a last chance for the Vietnamese automobile industry, if they know how to take advantage of technical barriers with tax and fee policies and, more importantly, identify the right strategic vehicle line.
Mr. Pham Van Liem - Former Deputy Director of the Institute for Industrial Policy Research said that to increase production output and expand the market, it is necessary to stimulate consumer demand. Accordingly, it is necessary to focus on reducing taxes and fees to reduce selling prices to consumers.
“It is necessary to reduce special consumption tax because this is a strong stimulus solution to increase the capacity of the automobile market, a driving force for businesses to be able to produce on a minimum scale effectively, and that is what determines the output for the automobile industry,” Mr. Liem asserted.
Meanwhile, Mr. Bui Ngoc Huyen - Chairman of Vinaxuki said that instead of creating policies to stimulate consumption, there should be policies to stimulate production.
“The sustainable and developed automobile industry lies in the development of supporting industries and spare parts. Vietnam has a population of over 90 million people and a huge demand for automobiles. If Vietnam does not develop a line of vehicles to serve this demand, it will be a gap. Localization of 40% - 50% or even 60% is not difficult, it is just a matter of what policies they can do,” Mr. Huyen suggested.
Expressing his opinion, Mr. Vu Quang Tam - Deputy General Director of the General Corporation of Engines and Agricultural Machinery (VEAM) said that it is necessary to immediately establish a Strategy and Plan for the development of the automobile industry until 2020, with a vision to 2030, with appropriate and stable support policies for the automobile industry that do not conflict with AFTA commitments.
“Industry support needs to be implemented synchronously in both areas: Investment in production development (improving assembly production capacity) and supporting industries… These policy mechanisms must remain stable for a long enough period of at least 5 years and have a specific roadmap for the following years to create confidence for investors,” said Mr. Tam.
While there are still controversies about the strategic car line as well as the priorities and incentives for it, many independent analysts affirm that the key issue, along with the courage of policy makers, requires the courage of investors themselves, and needs to consider the common good - for a Vietnamese car brand that suits the majority of Vietnamese people's needs and tastes in the short and long term - rather than trying to preserve the products and car lines that are being produced and assembled in Vietnam./.
According to VOV.online