Vietnam's automotive industry could face major collapse under commitments to the ASEAN Free Trade Area (AFTA) which will abolish auto import taxes in 2018.
ASEAN+ will waive taxes on car imports between ASEAN member countries, as well as Japan, the Republic of 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 will 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 (MoIT).
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 will 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 MoIT 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 1 billion USD and an output over 200,000 cars per year.
According to the MoIT’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 will 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 MoIT 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, MoIT Deputy Minister.
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 VAMA, domestic auto sales exceeded 49,800 units in the first half of this year, up 16 percent against the 2012 figure.
Car and truck sales grew 22 percent and 13 percent respectively from the same period last year.
VAMA forecasts indicate sales will reach 112,000 units after a proposed 10-12 percent cut in auto registration fees.-VNA
ASEAN+ will waive taxes on car imports between ASEAN member countries, as well as Japan, the Republic of 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 will 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 (MoIT).
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 will 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 MoIT 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 1 billion USD and an output over 200,000 cars per year.
According to the MoIT’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 will 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 MoIT 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, MoIT Deputy Minister.
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 VAMA, domestic auto sales exceeded 49,800 units in the first half of this year, up 16 percent against the 2012 figure.
Car and truck sales grew 22 percent and 13 percent respectively from the same period last year.
VAMA forecasts indicate sales will reach 112,000 units after a proposed 10-12 percent cut in auto registration fees.-VNA
