Vietnam's auto industry faces crossroads ahead of Asean
trade pact. Vietnam's automotive industry could face a major collapse under
commitments to the Asean Free Trade Area (Afta) which will abolish auto import
taxes in 2018.
Asean+3 will waive taxes on car imports between Asean member
countries, as well as Japan, South Korea and China, who are party to the
agreement.
The tax cut poses a disastrous threat to Vietnam's fledgling
auto industry, unable to compete with the price and quality of imports.
"If we do not make immediate measures, Vietnam would
become a big auto importer in the region" said Ngo Van Tru, Deputy Head of
the Heavy Industry Department of the Ministry of Industry and Trade.
It has been 20 years since foreign car makers first built
factories in Vietnam. In spite of a long history of government investment,
Vietnam's auto industry faces significant hurdles.
Under the new agreement, the country has only five years to
develop its auto industry to compete with an impending influx of imports after
2018.
"The situation shows that it would be a chance to
develop the local auto industry, but if we miss this chance, Vietnam will be
the auto import market," a representative from the Ministry of Industry
and Trade said in a recent conference.
There are currently 18 auto makers that belong to the
Vietnam Automobile Manufacturers Association (VAMA). Approximately 30 others
have a combined investment of over US$1 billion and an output over 200,000 cars
per year.
According to the Industry and Trade Ministry's report, the
local auto industry is behind on most of its targets.
While the target for local diesel production was set to
reach 100,000 units by 2010, Truong Hai is the only company to invest in a
diesel factory which will begin production in 2014.
As many as 100,000 gearboxes and 100,000 transmission
systems were forecast for production in 2010. No investment has been made.
Meanwhile, Vietnam plays host to only 210 auto parts
manufacturers, one fifth of Indonesia's production base and one fifteenth of
Thailand's.
Adding insult to injury, most of these companies produce
simple and low technology products with low local contents.
According to the General Director of Toyota Vietnam,
Yoshihisa Maruta, a long term development plan, stable policies and greater
incentives for auto makers would provide a necessary boost to Vietnam's auto
industry.
The GM Vietnam General Director, Guarav Gupta, called on the
government to develop a detailed plan to support the local auto industry and
boost investor confidence.
The Ministry of Industry and Trade has revised the auto
industry master plan in a bid to save the auto industry.
The Vietnam Automobile Development Plan, which looks as far
as 2020, classifies market opportunities to help producers meet the demands of
market segments. The plan aligns with current development plans to
revolutionise the manufacturing sector, according to Tran Tuan Anh, Deputy
Minister of Industry and Trade.
Anh said the Ministry has added three "breaking"
solutions to the revised plan, including stable policies for the auto industry,
producing environmentally-friendly vehicles and creating favourable conditions
for car makers.
According to the Vietnam Automobile Manufacturers
Association (VAMA), domestic auto sales exceeded 49,800 units in the first half
of this year, up 16 per cent on 2012 figures.
Car and truck sales grew 22 per cent and 13 per cent
respectively, from 2012.
VAMA forecasts indicate sales will reach 112,000 units after
a proposed 10-12 per cent cut in auto registration fees.
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