Automotive industry -The Ministry of Industry and Trade wants to attract investment from multinational corporations

The automobile industry in Vietnam has developed quite rapidly in the last two years. Photo Nguyen Ha

Domestic production meets 70% of demand

One of the important issues relating to the automobile industry has been the Ministry of Industry and Trade, authorized by the Prime Minister, to send to the National Assembly. The Vietnamese automobile industry has grown rapidly over the last two years.

By 2018, the domestic automobile industry has about 173 manufacturing and assembling companies, of which 56 are manufacturing vehicles from spare parts, and 117 are manufacturing vehicles. These sectors mainly focus on medium and small enterprises. Some inland businesses have been involved in the global automotive chain.

At present, the total design output of Vietnamese automobiles is about 500,000 units / year (foreign-invested sector accounts for 47%, domestic enterprises account for 53%).

Domestic manufactured vehicles meet about 70% of domestic demand, with total production of the passenger car market of 210,000 units per year in 2016, of which car production is over 160,000 cars

For types of trucks, passenger cars of 10 seats or more, locally-made special-purpose vehicles, which have achieved high localization rates, have met the targets set basically to satisfy the domestic market (small trucks 07 tons meet about 70% of demand, with the localization rate of 50%, passenger cars of 10 seats or more and specialized vehicles meet about 90% of demand, with the localization rate of 45% to exceed the target compared to the plan).

Truong Hai Auto Company has invested and inaugurated the automobile manufacturing plant under the brand name of Mazda. This is one of the most modern and effective factories in the region

Localization has not reached its goal

However, the Ministry of Industry and Commerce acknowledged that the Vietnamese automobile industry has not yet created cooperation between the enterprises in manufacturing and assembling automobiles and producing spare parts. As a result, the localization rate of some vehicles has not reached the set target.

In particular, the target for localization rates for individual cars to nine seats has failed. Specifically, the target was set to 40% in 2005, 60% in 2010, but so far has only reached about 7-10%. Meanwhile, the localization rate of countries in the middle region has reached 65-70% (Thailand reached 80%). This makes domestic products difficult to compete with the regional market.

The products have been localized with low technological content such as tubes, automobile tires, seats, mirrors, glasses, wires, batteries; plastic products ... Up to 80-90% of main raw materials for the production of components such as steel alloy, aluminum alloy, plastic resin, high-tech rubber are now imported. Molded materials must also be imported.

Every year, businesses have to import about $ 2-3.5 billion of components and spare parts for manufacturing, assembling and repairing vehicles.

Weak capacity of enterprises in the supporting industry is also a concern. The mold makers either do not have a large scale or lack coordination for development. The casting industry and casting details for the industry are not high and the rate of defects is high, not meeting the requirements of the industry.

Therefore, although not mentioned in the report, there is a reality that car prices in Vietnam after the import tax in ASEAN 0% from the beginning of 2018 are not as cheap as expected.

Thanh Cong's modern automobile production line, Vietnamese enterprises shift from importing to manufacturing and assembling in the country

Foreign investors are not interested

The campaign of the automobile industry is not effective as expected, according to the Ministry of Industry and Trade, Vietnam is the backwater country in the region (compared with countries such as Thailand, Indonesia, and Malaysia). The automotive industry is dominated by multinational corporations. They decide completely the research - development, place of production, mode of sale...

Meanwhile, before investing in an assembly project in Vietnam, the major automobile corporations of Japan, USA ... have invested in projects of producing cars in large scale in the ASEAN area. The capacity of subcontracting projects is often calculated for the regional market, rather than the country where the plant is located, so the Group does not have large scale investment projects in Vietnam because the market size is too small, equal to 1/10 Thailand, 1/5 Indonesia.

Therefore, the direction of automobile industry in the coming time, the Ministry of Industry and Trade said that it is necessary to take advantage of market opportunities issued by the policy, focusing on supporting to accelerate the project of domestic enterprises such as Public Truong Hai Automobile Joint Stock Co (Thaco), Thanh Cong Group Joint Stock Company, Vingroup (VinFast) and other projects to increase automobile production and assembly.

Vinfast is being invested by Vingroup Group with total capacity up to 250,000 units per year

Reporting to Congress, it is necessary to have more specific policies for the automotive industry. As proposed by the National Assembly, the special consumption tax rates applicable to vehicles with high localization rates (excluding special consumption tax on locally produced value) shall be applied. Domestic production; Pilot supply chain of automobile industry for automobile and automobile assembly and manufacturing enterprises.

At the same time, the Ministry of Industry and Trade also wants to have mechanisms and policies to attract investment from multinational corporations to invest in large-scale projects in Vietnam, especially focusing on brands and vehicles that are not yet available in Vietnam to facilitate the participation of domestic firms in the multinational automobile chain.