The presence of global auto components is absent in the Vietnam market, as the auto industry is said to still remain very small.
More than 90% of the existing component suppliers in the country are foreign-invested companies, with the majority of components and materials for auto manufacturing and car spare parts being imported.
This dependence, together with packaging and logistics expenses and import tariffs, has made car making costs in Vietnam higher than those in Thailand or Indonesia. The gap in production cost can rise to 10-20% after tariff is abolished within ASEAN in 2018.
The AWG suggested the automotive working group of the government should include representatives of both auto assemblers and component suppliers to attain a full understanding of the industry’s situation.
Policy makers should continue working with businesses to devise solutions for narrowing the gap of production costs in order to ease the competition pressure on domestic car makers as from 2018. They also need to develop programmes to help firms to connect with one another in the auto industry.
Head of the AWG Sumito Ishii, Managing Director of the General Motors Vietnam Co. Ltd, said the top priority is to ensure a car market with sustainable growth while relevant policies must be kept stable for a long time so that businesses can devise their plans.
Deputy General Director of the Truong Hai Auto Corporation (THACO) Pham Van Tai said to develop the auto industry amid integration, the government needs to have appropriate policies to protect the domestic car market so that enterprises can gain enough financial and technological strength and invest in research and development activities.
Policies regarding the auto industry, and the industry supporting the car making sector should be consistent for at least 10 years, and be in line with the integration trend, thus facilitating small and medium-sized firms’ participation in the support industry’s value chain, he noted.
Tai also underlined the Ministry of Industry and Trade (MoIT)’s recent proposals which, he said, will create new momentum for the domestic auto industry and its support industry once they are approved. They include a proposal that the Government cut the import tariff on car components that are not made domestically from 15-20% to 0%.
At the forum, businesses also asked the Government to take measures to prevent trade frauds to ensure a healthy and fair competition environment for all firms.
Vietnam failed to realise the goals for its auto industry after over two decades of efforts, according to the MoIT.
The local content of car is currently about 7-10%, far from the original targets of 40% by 2005, and 60% by 2010. Domestic cars have lower quality and higher prices than imported ones, with production stopping at simple levels focusing on welding, painting, assembling, and inspection. The failure of the domestic car industry was partly attributed to unstable policies on taxation, fees and infrastructure and a lack of consensus among state management agencies, inhibiting carmakers’ intention to expand operations.