Cars made in Vietnam: Who makes them, and with whom? -

There are many goals and ambitions set for the Vietnamese automobile industry, but who will implement them is still unknown and there is no time left. Everyone is still waiting for specific and clear policies.

Time is running out but still have to wait

The Strategy and Planning for the development of Vietnam's automobile industry for the next 10 and 20 years was approved by the Prime Minister in late July and early August 2014.

There are many goals and ambitions set for the Vietnamese automobile industry, but the question is who will take on this responsibility? Up to now, there is still no clear answer. Certainly, to develop the automobile industry, we must rely on enterprises, but the enterprises themselves are struggling, not knowing what to do.

A series of well-known FDI automobile enterprises with financial potential, strong brands, technological know-how, and sufficient production capacity still said they have not yet decided whether to invest in automobile production in Vietnam. All are still waiting for specific policies from the Government.

Many auto manufacturing projects are on hold, waiting for more specific policies.

With 100% domestic capital, Xuan Kien Automobile Joint Stock Company (Vinaxuki) has recently invested heavily in automobile production, from mold processing, stamping body parts, Plasma cutting equipment, welding, modern painting... to produce car frames of all kinds, including cars with less than 9 seats, with a localization rate of over 40%. However, this enterprise is in a difficult situation due to lack of capital and has not been able to bring any notable car models to the market, including trucks, and is having to sell scrap metal to pay workers' salaries.

Truong Hai Group, in addition to trucks and passenger cars, is also assembling a series of car brands such as Mazda, Kia, Peugeot... In addition to the modern car assembly line, Truong Hai has invested in producing some components, but mainly simple products such as windshields, seats, front bumpers...

The most prominent project of this company is the production of engines with technology transferred from the Korean Hyundai Group, but it has been terminated since the beginning of 2014. The reason: the time commitment for technology transfer has expired but the factory has not been built yet. The project to produce new car engines is in the process of negotiation with Hyundai, hoping to restart in 2016 and produce engines meeting Euro 4 standards instead of Euro 2 as before. However, success or not depends on Hyundai's "nod", and nothing is clear yet.

Hyundai Thanh Cong Company has just completed the first phase of investment in the automobile factory, with a total capital of 80 million USD, including an automatic car frame welding line with a capacity of 40,000 cars of all types/year. Hyundai Thanh Cong said it will promote investment in the second phase, with a car body stamping workshop, which will invest in the production of some electronic components, following the technology transfer of Hyundai Korea. The purpose is to achieve a localization rate of 40%, to enjoy incentives when exporting cars to Southeast Asian countries. However, the car body stamping project requires a large investment capital, along with a large production output, otherwise it will be very difficult to succeed and it is unclear when it will start.

A foreign investor, Mazda, also plans to establish a joint venture with Truong Hai to invest in an automobile manufacturing plant with a localization rate of 40% in 2018, but is still waiting for specific policies from the Government.

While FDI enterprises do not make clear decisions, domestic enterprises are facing many problems such as lack of capital, technology, experience, weak brand, while automobile production requires large investments in research and development, testing... and time cannot wait.

Vietnam's auto industry: When will the dream come true?

The opportunity is gone.

According to the Ministry of Industry and Trade, there will be no further amendments to the special consumption tax policy for automobiles, as the Law amending and supplementing a number of articles of the Law on Special Consumption Tax has just been passed by the National Assembly, effective from January 1, 2016. After every 3 years, the Government will consider issuing a roadmap to reduce special consumption tax on this item. Previously, at the Government meeting, the Ministries also agreed to maintain the roadmap for automobile import tax according to the commitment to join AFTA as issued.

Specifically, in 2015, the import tax rate for complete automobiles from the ASEAN region to Vietnam remained at 50%, decreased to 40% in 2016, 30% in 2017 and 0% in 2018.

According to the general assessment of experts, the advantage will belong to completely imported cars, because the import tax rate has been sharply reduced and imported cars also enjoy the same special consumption tax rate as domestic cars. Thus, automobile companies in Vietnam are at risk of having difficulty surviving in the near future.

Mr. Duong Dinh Giam, Director of the Institute of Industrial Strategy and Policy (Ministry of Industry and Trade), said: “When developing the Automobile Strategy and Planning, we expected that policies - specifically the special consumption tax - would be reduced and implemented from the beginning of 2015. Thus, the automobile market would quickly increase in scale and businesses would have time to increase production, thereby helping to promote domestic investment. However, with the amended special consumption tax law this time, no further amendments are allowed, and having to wait 3 years is too slow.”

Enterprises hope that the authorities will erect technical barriers to protect domestic cars. However, an engineer from Toyota Vietnam said that this is considered ineffective because the car exporting countries in the region have higher technical levels than us, so it is difficult to implement. Other barriers such as tightening the inspection of imported cars, allowing imports only at two seaports, requiring dealers selling imported cars to deposit... only cause difficulties, but cannot prevent imported cars, because domestic cars cost 20% more than imported cars.

The goal of developing the automobile industry is to promote and increase the localization rate. To do so, we must develop the supporting industry. Conversely, to develop the supporting industry, we must first maintain the existence of automobile assembly enterprises. Without assembly, there can be no component production. If automobile enterprises no longer exist, the automobile industry will also wither.

According to Vietnamnet