Workers assemble cars at Ford Hai Duong. Regulations on the automobile localisation ratio will soon be revoked to be in line with the development and change of technological processes of automobile production and assembly. (Photo: VNA) Hanoi (VNS/VNA) - Regulations on the automobilelocalisation ratio will be abolished on October 10, 2022 after having been inforce for almost 20 years.
TheMinistry of Science and Technology in mid-August enacted Circular No11/2022/TT-BKHCN to rescind the regulations on methods to calculate theautomobile localisation ratio, including Decision No 28/2004, Decision No 05/2005 and Circular 05/2012. The new circular will take effect from October 1this year.
Undercurrent regulations, Vietnam calculates the automobile localisation ratio byclusters of components produced in the country. Meanwhile, othercountries calculate this as a percentage of domestic production value.
This makesit difficult for businesses to enjoy the preferential import tax rate of 0% ifthe automobile localisation ratio within the bloc, as with ASEAN, is 40%.
Regardingthe discrete level of imported auto parts, components must come in clusters,accompanied by many different details.
Vietnam'sautomobile industry remains a fledgling one after more than 30 years since thecountry opened its door to foreign investment.
Thecurrent average localisation ratio of passenger cars with up to nine seats isas low as 7-10%, according to data released by Deputy Minister of Industry andTrade Do thang Hai last August. The Government target is 30-40% by 2020, 40-45%by 2025 and 50-55% by 2030.
TheMinistry of Industry and Trade (MoIT) reports that the current localisationratio is now 40-50% for trucks, and 55% for buses. Therefore, the currentregulations related to methods of determining the localisation rate were nolonger relevant.
Automotive experts said the abolition of these regulations is inline with the development and change of technological processes of automobileproduction and assembly in the country and the world to ensure transparency.The abolition will also help meet international standards.
Theremoval of those regulations will also help improve the investment climate andallow domestic automobile manufacturers to maintain production in competitionwith completely-built-up (CBU) cars imported from ASEAN countries with a taxrate of 0% from 2018.
Accordingto the MoIT, the localisation rate of passenger cars in Vietnam is still quitelow due to the slow development of auto parts and accessories suppliers, in termsof both quantity and quality. Only a few domestic suppliers can get involved inthe supply chains of automobile manufacturers in Vietnam.
Accordingto the MoIT, the average output growth of the auto industry is much lower thanthat of the whole industry.
Domesticenterprises have been left behind in the race for high-quality auto parts andaccessories due to their low speed of technological innovation. Many auto partssuppliers still have little capability and production technology to getinvolved in the value chains of the domestic automotive industry.
Overthe past 10 years, Vietnam has signed a series of free trade agreements (FTAs),such as the ASEAN Trade in Goods Agreement, the Comprehensive and ProgressiveAgreement for Trans-Pacific Partnership, and the EU–Vietnam Free TradeAgreement.
Theseagreements require member states to commit to the removal of tariff barriersfor imported cars and auto parts./.
