Vietnam's automotive industry could face major collapse undercommitments to the ASEAN Free Trade Area (AFTA) which will abolish autoimport taxes in 2018.
ASEAN+ will waive taxes oncar imports between ASEAN member countries, as well as Japan, theRepublic of Korea and China, who are party to the agreement.
The tax cut poses a disastrous threat to Vietnam's fledgling autoindustry, unable to compete with the price and quality of imports.
"If we do not make immediate measures, Vietnam will become a bigauto importer in the region" said Ngo Van Tru, deputy head of the HeavyIndustry Department of the Ministry of Industry and Trade (MoIT).
It has been 20 years since foreign car makers first built factories inVietnam . 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 itsauto industry to compete with an impending influx of imports after2018.
"The situation shows that it will be a chanceto develop the local auto industry, but if we miss this chance,Vietnam will be the auto import market," a representative from theMoIT said in a recent conference.
There arecurrently 18 auto makers that belong to the Vietnam AutomobileManufacturers Association (VAMA). Approximately 30 others have acombined investment of over 1 billion USD and an output over 200,000cars 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 100,000units by 2010, Truong Hai is the only company to invest in a dieselfactory which will begin production in 2014.
As manyas 100,000 gearboxes and 100,000 transmission systems were forecast forproduction 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 ofThailand'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, YoshihisaMaruta, a long-term development plan, stable policies and greaterincentives 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 tosupport 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 ofmarket segments.
The plan aligns with currentdevelopment plans to revolutionise the manufacturing sector, accordingto Tran Tuan Anh, MoIT Deputy Minister.
Anh said theministry has added three "breaking" solutions to the revised plan,including stable policies for the auto industry, producingenvironmentally-friendly vehicles and creating favourable conditions forcar makers.
According to the VAMA, domestic autosales exceeded 49,800 units in the first half of this year, up 16percent 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