High prices hamper auto growth in Vietnam hinh anh 1(Illustrative Photo: VNA)

Hanoi (VNA) – Automobiles which are priced higher in Vietnam than in regional countries is the reason for the sluggish development of the automobile industry, experts say.

The information was discussed by participants at the seminar on the real situation of the automobile industry and spare parts in Vietnam, held in Hanoi on December 8.

Nguyen Thi Xuan Thuy, an official from the Ministry of Industry and Trade's Institute for Industry Policy and Strategy, said the price of cars in Vietnam was more than in other countries including Indonesia and Thailand.

She cited some examples of vehicles in the middle segment. The prices of Toyota Vios and Toyota Innova were 570 million VND (25,300 USD) and nearly 800 million VND (35,500 USD) in Vietnam, while in Indonesia they were 11,700 USD and 12,530 USD, respectively. Similarly, Honda CRV 2.0AT in Vietnam was more than 44,400 USD, which is about 27,000 USD higher than that in Indonesia.

Thuy said the price of cars in Vietnam was three or four times higher than that of other countries because the vehicles had to suffer various kinds of taxes and fees, which occupied 40 percent of the car value, and production cost for a car was 20 percent higher than that of other countries.

"The domestic auto market has grown strongly in recent years. Although Vietnam had produced a number of auto spare parts, the rate of purchase is still low. The car body is the most imported product," Thuy said.

Pham Anh Tuan, representative from Toyota Motor Vietnam said the scale of the Vietnamese auto market was lower by 5 percent to 10 percent in comparison with Thailand and Indonesia as it had a weak support industry. Meanwhile, the price of cars had been absorbing too many expenses related to taxes and fees, leading to such high production costs.

"Almost all automakers in the world are present in the ASEAN region and Vietnam. They have met success in other nations but not as yet in Vietnam," Anh Tuan was quoted as saying by phapluattp.vn.

He said Toyota had to itself invest and produce many devices because there was no supplier in Vietnam. Car bodies and exhaust pipes are an example. Of the 18 domestic spare part suppliers, most of them were subsidiaries of parent companies from Japan.

"The domestic businesses supplying made-in-Vietnam parts for Toyota will have to give a price lower than that imported from Thailand. This is proving very difficult for them because their technologies are too weak," Anh Tuan said.

According to Deputy Chairman and General Secretary of Vietnam Association of Mechanical Industry (VAMI) Dao Phan Long, it is necessary to acknowledge what Vietnam had done for the automobile industry in the past 20 years.

"Policies on the auto industry have failed on two fronts. Firstly, the foreign investment businesses has failed to localise expensive spare parts. Secondly, Vietnam has not yet received a good auto trademark," Long said.

Under the free trade agreements in ASEAN countries, the import tax of automobiles from ASEAN will be cut to zero percent by 2018. This commitment has been pressing on the domestic auto production and many automakers face the risk of shutdown.

To solve the problem, improve competitiveness and reduce car prices, Thuy suggested reducing taxes and fees. It needed to focus on a tax on spare parts, which were imported to be assembled in the country, and consider decreasing special consumption tax at suitable levels to avoid making the market ‘too hot'.

"The Government needs to create conditions for businesses to develop the support industry, especially car bodies," Thuy said.

Long said the Vietnamese market was so large and attractive that many producers wanted to jump in. However, while the country could not wait for localisation of automobile parts from foreign investment businesses in the domestic market, it was necessary to improve the development of the domestic industry by producing suitable products.

Sharing the opinion at the conference, Anh Tuan proposed that businesses maintain production and increase output as well. They should create conditions to attract investment and increase the localisation rate in order to lower production costs. The current high production cost was due to the fact that the auto producers had to import more than 80 percent of parts, shelling out more on packaging, carriage and import tax as well.

At the conference, the participants agreed that the country's potential was high to develop the automotive industry. By 2020, the average income was predicted to be 3,000 USD per head while the consumption volume would be 400,000 units.-VNA