Localisation rate of Vietnamese automobile industry remains low

The MoIT has given an outline of the domestic automobile manufacturing and assembly industry in a recent report sent to the National Assembly, noting that large-scale automobile assembly and production projects are striving to meet both domestic demand and also that of the regional market. As a result, it is anticipated that the correlation of output between locally assembled and imported vehicles over the short and medium terms will change with there set to be an increase in terms of domestically made vehicles.

Despite this, the Vietnamese automobile industry is losing its advantages due to an increasing number of imported cars, with there being a 70% surge in imported vehicles in 2019 in comparison to 2018, with the majority coming from ASEAN member states.

According to the MoIT, the major limitation of the domestic automobile industry is due to the nation failing to master core technologies such as engines, control systems, and transmission systems. For localised products, they have low-technology contents such as inner tubes tires, tires, seats, mirrors, chassis frames, glasses, wires, batteries, and plastic items.

Moreover, local selling prices remain higher than those seen in other regional partners, with production cost up to 20% higher, therefore resulting in domestic prices facing plenty of disadvantages compared to completely-built-up cars imported from ASEAN which face no tariff barriers.

The MoIT has attributed these high prices seen in domestically produced cars to small scale production occurring alongside the nation’s underdeveloped supporting industry.

The country’s automobile industry can therefore be considered to remain underdeveloped as it is between two to three generations behind its regional partners. In addition, the nation does not possess an industrial ecosystem that is capable of creating a favourable environment due to low market capacity in production investment.

Furthermore, the quality of local enterprises and human resources within the domestic automobile industry remains low, while little attention has been given to research and development. As a result of underdeveloped supporting industries, there is an inadequate control of basic materials along with input components for the industry.

In order to develop the domestic automobile industry whilst simultaneously increasing the localisation rate and lowering production costs, the MoIT has proposed that the Government and National Assembly agree to revise the provisions of the Law on Special Consumption Tax for cars by reducing special consumption taxes on locally produced vehicles.

This policy will help deal with disadvantages in terms of prices between domestically produced and imported products, as well as encouraging the increase of the domestic value ratio as a way of developing the supporting industry of automobile manufacturing.