Automobile imports increases sharply, policy on localization loses advantages

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The volume of CBU imported cars has seen a sharp increase from the beginning of 2019

The Ministry of Industry and Trade has sent to the National Assembly a report on the implementation results of the resolutions from the beginning to the end of the 8th session, the 14th National Assembly, which states a lot of information on the implementation of the targets and objectives in Vietnam's automobile industry development plan to 2025, orientation to 2035; key mechanical products; and production incentives to ensure the localization rate in the automobile industry.

According to the Ministry of Industry and Trade, currently domestic assembly and manufacturing enterprises have initially affirmed their role and position in the domestic automobile market and towards the regional market.

Many large-scale automobile assembling and manufacturing projects aim to meet not only domestic demand but also the regional market, such as the Vinfast automobile production complex in Hai Phong; assembling and manufacturingfactories of Mazda cars; trucks and buses of Truong Hai Automobile Joint Stock Company (Thaco); projects for expanded manufacturing of cars of Hyundai of Thanh Cong Group Joint Stock Company.

Most recently, Thaco exported its first batch of vehicles (buses owned by Thaco and cars by Kia Motors) to Southeast Asian countries (the Philippines and Thailand).

In addition, the Ministry of Industry and Trade assessed that comparisons on output between domestically manufactured and assembled cars and imported cars in the medium and short-term has a change in the direction of increasing the number of manufactured and assembled cars.

Light trucks of less than seven tons, passenger cars with 25 seats or more, and domestically manufactured special-purpose cars have reached a high localization rate, meeting the targets set out in Vietnam’s automobile industry development plan, basically meeting the demand of the domestic market.

The quality of imported cars is more strictly controlled, ensuring the interests of consumers.

However, the Ministry of Industry and Trade also pointed out many shortcomings and limitations in the development of Vietnam's automobile industry.

Specifically, this industry only participates in the low segment of the automobile industry value chain and heavily depends on the manufacturing assignment by global automobile corporations and has not yet mastered core technologies such as engines, control systems and transmission systems.

In addition, the domestic automobile assemblingand manufacturing industry has not been able to create cooperation, links and specialization between enterprises in automobile assembly and manufacturing and spare parts production; a system of large-scale material suppliers and components manufacturers has not been developed and the price of domestic cars is still higher than other countries in the region.

Notably, the localization rate for 9-seater cars is still behind the set target and much lower thanin other regional countries. Products that have been localized have low technological content, such ascar tires, seats, mirrors, wiring sets, batteries and plastic products, etc.

It is said that although the policy to promote the development of the automobile industry and to increase the localization rate of domestically manufactured cars had a positive impact on domestic manufacturing and assembly, the Ministry of Industry and Trade also emphasized that it no longer maintains its advantages due to sharp increase in imported CBU cars from the beginning of 2019.

The Ministry of Industry and Trade pointed out that the main reason for these shortcomings is that Vietnam is a country with a low starting point and Vietnam's industries are lagging behind other countries in the region bytwo to three generations.

Vietnam does not have an industrial ecosystem to create a favorable environment for the development of the automobile industry. The market size for this industry is insignificant and has not been economic in production investment.

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In addition, the level of companies and the human resources of the automobile industry are low. Research and development have not been actively focusedand the supportive industry has not yet developed, leading to failure in autonomy of basic materials as well as input components for the automobile industry.