Hanoi (VNA) – The auto industry in Vietnam is stillvery small, which is the reason why global auto component suppliers have notmade their full presence in the market, the Automotive Working Group (AWG) saidat the 2017 Vietnam Business Forum in Hanoi on June 27.

According to the group, more than 90 percent of the existingcomponent suppliers in the country are foreign-invested companies, and the majorityof components and materials for auto manufacturing and car spare parts areimported. 

This dependence, together with packaging and logisticsexpenses and import tariffs, has made car making costs in Vietnam higher thanthose in Thailand or Indonesia. The gap in production cost can rise to 10 – 20percent after tariff is abolished within ASEAN in 2018.

The AWG suggested the automotive working group of theGovernment should include representatives of both auto assemblers and componentsuppliers to get a full understanding of the industry’s situation.

Policy makers should continue working withbusinesses to devise solutions for narrowing the gap of production costs so asto ease the competition pressure on domestic car makers as from 2018. They alsoneed to develop programmes to help firms to connect with one another in theauto industry.

[Ministry mulls auto industry protection]

Head of the AWG Sumito Ishii, Managing Directorof the General Motors Vietnam Co. Ltd, said the top priority is to ensure a carmarket with sustainable growth while relevant policies must be kept stable fora long time so that businesses can devise their plans.

Deputy General Director of the Truong Hai AutoCorporation (THACO) Pham Van Tai said to develop the auto industry amidintegration, the Government needs to have appropriate policies to protect thedomestic car market so that enterprises can gain enough financial andtechnological strength and invest in research and development activities.

Policies regarding the auto industry and theindustry supporting the car making sector should be consistent for at least 10years and be in line with the integration trend, thus facilitating small- andmedium-sized firms’ participation in the support industry’s value chain, henoted.

Tai also underlined the Ministry of Industry andTrade (MoIT)’s recent proposals which, he said, will create new momentum forthe domestic auto industry and its support industry once they are approved.They include a proposal that the Government cut the import tariff on carcomponents that are not made domestically from 15-20 percent to zero percent.

At the forum, businesses also asked theGovernment to take measures to prevent trade frauds to ensure a healthy andfair competition environment for all firms.

The MoIT earlier admitted that Vietnam failed torealise the targets set for its auto industry after over two decades ofefforts. In particular, the local content of cars is just about 7 – 10 percentat present while the original targets were 40 percent by 2005 and 60 percent by2010. Domestically made cars have lower quality and higher prices comparedto imported ones, with production stopping at simple level focusing on welding,painting, assembling, and inspection.

It partly attributed the failure to instablepolicies on taxation, fees and infrastructure for the sector and a lack ofconsensus among state management agencies, thus hampering carmakers’intention to expand operations.-VNA