Low level of car production holds back Vietnamese auto part suppliers hinh anh 1Auto parts manufactured at a Vietnam Motors and Agricultural Machinery Corporation factory. (Photo: baotintuc.vn)
Hanoi (VNS/VNA) – Some 50,000 vehicles per year is the minimum production level needed for the growth of the Vietnamese auto part industry. Unfortunately, few car producers in Vietnam have reached such a level.

Only Toyota and Hyundai crossed the threshold in 2021, with 64,172 and 56,028 vehicles, respectively.

Meanwhile, Kia fell short of the threshold with just 35,181 vehicles. VinFast followed with 34,746 and Mitsubishi with 26,346.

Truong Thi Chi Binh, an expert at Vietnam Institute of Strategy and Policy for Industry and Trade, underlined the low level of car production as a setback for the Vietnamese auto part industry.

She said low production meant low demand for domestic auto parts, discouraging suppliers from investing in new production lines.

Without new production lines, the suppliers become less competitive in price as they cannot achieve economies of scale.

Consequently, car producers have to find their auto parts elsewhere.

“Since auto production is insufficient to encourage domestic auto parts production, many car producers have no choice but to import their inputs,” Binh said.

The expert believes that Vietnam should introduce favourable policies to boost the growth of the domestic industry.

Otherwise, Vietnamese suppliers will be priced out of the market by foreign competitors.

The general director of a Japanese auto producer shared the view. He pointed out that car parts prices in Vietnam are two to three times higher than those in other regional countries.

Auto producers in Thailand purchase just 10 percent of car parts from abroad. They get the rest from around 3,000 Thai suppliers.

Meanwhile, auto producers in Vietnam have to import 80-85 percent of car parts, effectively reducing the number of Vietnamese suppliers to around 300.

The general director called for more favourable policies to encourage domestic production of auto parts, particularly medium-sized steel and plastic parts.

Two experts at the Faculty of Economics, Vinh University, revealed that on average, an auto producer buys car parts from two domestic suppliers.

With over 90 percent of suppliers in Vietnam being FDI firms, Vietnamese firms take up a minority.

According to the Vietnam Register, 318,704 cars were sold and registered in Vietnam in 2021, higher than the figures in 2020 (296,634) but lower than in 2019 (322,322)./.