Vietnam's car output is one-tenth of Thailand's.

Vietnam's automobile market size is currently the lowest among the five countries pursuing this industry in the ASEAN region.

The above information isMr. Truong Thanh Hoai, Head of the Department of Industry, Ministry of Industry and Trade said.at the conference "Automotive industry and opportunities for developing production networks in Vietnam” October 12. The size of Vietnam’s automobile market is still too small, the lowest among the five countries pursuing the automobile industry in ASEAN. According to Mr. Hoai, compared to Thailand, the market size is only one-tenth, and compared to Indonesia, it is one-fourth.

According to Mr. Hoai, the supporting industry for the Vietnamese automobile industry has been formed, but it has only been able to produce a number of simple spare parts with low technology content such as mirrors, glass, seats, wiring harnesses, batteries, etc. Only a few businesses have invested in stamping lines for car bodies and shells.

Mr. Vo Quang Hue, Deputy General Director of Vingroup Corporation - in charge of the Vinfast project, also said that currently in Vietnam, on average, only 23 people out of 1,000 people own a car. Meanwhile, the equivalent figure in Thailand is 204 and the minimum in developed countries is 400. In the US alone, the car ownership rate is 790 out of 1,000.

Vietnam's total vehicle assembly capacity is about 500,000 vehicles per year, far behind Thailand's 2 million and Indonesia's 1 million.

“However, many analytical data show that Vietnam can still become one of the potential automobile markets in the next 10-15 years, due to its GDP per capita, economic growth, infrastructure and attractive demographic characteristics,” said Mr. Hue.

Some auto companies are very successful with the strategy of assembling foreign-branded cars. Photo: Van Dong

According to the Vietnam Automobile Manufacturers Association (VAMA), small output is also one of the biggest difficulties of the Vietnamese automobile industry.

VAMA representative said that due to small market and output, depreciation costs for equipment investment are large, leading to higher car production costs in Vietnam than other countries in the region.

For example, he said, Thailand's Vios car production is eight times that of Vietnam. Meanwhile, production costs in Vietnam are one and a half times higher.

In addition, according to VAMA, most auto parts are currently imported, so manufacturers in Vietnam have to bear additional costs such as packaging, transportation, and taxes, leading to the total cost of producing a car in Vietnam being higher than in Thailand or Indonesia. From 2018, import tax on complete cars from the ASEAN region will be 0%, however, the tax on components is still higher than 0%. Therefore, VAMA representatives believe that the domestic auto manufacturing industry will have a very difficult time competing and surviving. That is also the reason why the supporting industry cannot develop.

The association therefore also proposed that the Government should have more consistent and stable tax policies related to automobiles for sustainable market development. Specifically, in the short term, import tax on components should be reduced or abolished from 2018 for automobile manufacturers and component manufacturers, but not linked to conditions on output and localization.

Agreeing with the difficulties and challenges that the auto industry is facing, the representative of the Ministry of Finance expressed disappointment when businesses only offered one solution: tax reduction.

Ms. Nguyen Thi Thanh Hang, Deputy Director of Tax Policy Department, Ministry of Finance said:“Personally, I am happy that manufacturing enterprises are showing a message that they are determined to build an automobile industry. However, I am disappointed with the solution proposed by VAMA. I agree when VAMA talks about the characteristics, difficulties and challenges of the automobile industry, the development experience of other countries... but in the end, the solution only proposes tax reduction," Ms. Hang said.

Instead, according to her, businesses should not focus too much on tax policies but have other solutions to develop the automobile industry.

In the immediate future, the Government needs to find solutions to help the auto industry maintain production development after 2018, followed by research on policies to develop the supporting industry.

Ms. Hang also said that in 20 years of developing the automobile industry, the protection tax policy for production is very high. Specifically, the tax policy for components is always 70% lower than that for imported complete cars. "However, tIn fact, from 2004 until now, why is localization still low?" she asked.

From 2018 totime to reduce import tax on completely built-up cars from ASEAN to 0%. The representative of the Tax Policy Department said that this is the time to be determined. Not only with tax policy, according to her, it is necessary toFocus on solutions to create connections between manufacturing enterprises,..., together to promote the domestic automobile industry.

According to VNE