Imported automobile increase sharply, localisation policy losing the advantage

the number of completely built up (CBU) has increased sharply since the start of 2019

The Ministry of Industry and Trade sent the National Assembly a report on the results of implementing resolutions of the National Assembly from the beginning of the term to the end of the 8th plenary meeting of the 14th National Assembly. It mentioned quite a lot of information on objectives and targets of Vietnam's automobile industry development plan to 2025, orientation to 2035; key mechanical products; and production incentives to ensure localisation in the automotive industry.

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

Many automobile assembly and production projects on a large-scale have been deployed to meet not only domestic demand but also regional markets such as the Vinfast automobile manufacturing complex in Hai Phong; tour bus manufacturing and assembling factories of Mazda; trucks, buses of Truong Hai Automobile Joint Stock Company (Thaco); projects to expand the production of tour bus and commercial vehicles branded Hyundai of Thanh Cong Group Joint Stock Company.

Recently, Thaco exported its first batch of automobiles (buses owned by Thaco and tour buses branded Kia Motors) to Southeast Asian countrie, namely thePhilippines and Thailand.

Besides that, the Ministry of Industry and Trade assessed the correlation of volume between vehicles manufacturing and assembling domestically and vehicles imported in the medium and short-term has shifted to increasing number of vehicles manufacturing and assembling domestically.

Light trucks of under 7 tonnes, passenger cars with 25 seats or more and specialised purpose vehicles manufacturing domestically have reached a high localisation rate, meeting targets set in Vietnam's automobile industry development plan to 2025, basically meet needs of the domestic market (trucks of up to 7 tonnes meet about 70% of demand).

The quality of CBU is strictly controlled, ensuring interests of consumers.

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

Specifically, this sector only participates in the low segment of the automotive value chain and is heavily dependent on the assignment of production of global automobile corporations, not mastering core technologies such as engines, control systems and transmission systems.

In addition, the domestic automobile manufacturing and assembly industry has not been able to create cooperation, links and specialisation between automobile-related manufacturing and assembling enterprises and spare parts manufacturing enterprises and it has not created a system for raw material suppliers and large-scale manufacturing of spare parts. The selling price of domestic automobiles is still high compared to other countries in the region.

Notably, localisation rate for personal cars of 9-seat is still lower than the target and much lower than other regional countries. For products that have been localised with low technological content such as: tires, car tires, seats, mirrors, glasses, wiring sets, batteries and plastic products, etc.

Recorgnising that hough the localisation policy aims to increase the localisation rate of manufaturing domestic has had a positive impact on domestic production and assembly activities, the Ministry of Industry and Trade also stressed it was no longer able to maintain its current advantages. The reason was the number of CBU has increased sharply since the beginning of 2019.

The main cause of these shortcomings and limitations per the Ministry of Industry and Trade was that Vietnam is a country with a low starting point and Vietnam's industries lag behind other countries in the region from 2 - 3 generations.

Vietnam did not have an industrial ecosystem to create a favourable environment for the development of the automotive industry. Market capacity for the automotive industry is small, not ensuring economical factors in production investment.

In addition, the knowledge level of enterprises as well as the human resources of the automobile industry are low. Research and development has not been a big concern by businesses and the supporting industry has not developed yet, leading to the lack of autonomy of basic materials as well as input components for the automotive industry.