Vietnam’s automobile support industry remains underdeveloped

HCM City (VNA) – The supporting industry for Vietnam’s automobile manufacturing sector is still underdeveloped, heard a seminar on the industry’s development in the fourth industrial revolution in Ho Chi Minh City on March 13.

According to the Institute of Industrial Policies and Strategies (IIPS), Vietnam is one of the five ASEAN nations manufacturing vehicles, besides Thailand, Malaysia, Indonesia and the Philippines.

Among the five, Vietnam ranks third in population after Indonesia and the Philippines, but its automobile production output ranks fifth, with a yearly output of 300,000 vehicles.

The country has 20 automobile assembling firms, with 84 Tier-1 part suppliers and 145 suppliers of Tier -2 and 3. Meanwhile, Thailand has only 16 assembling companies, but the number of Tier-1 suppliers amounts to 690, and that of Tier-2 and 3 suppliers is 1,700.

Nguyen Thi Xuan Thuy, IIPS representative, said that due to the small scale of Vietnam’s automobile market, the costs for producing auto parts or components are high. Therefore, demand for domestically made parts is relatively low, constraining the development of the local supporting industry.

As a result, automobile assembly firms choose to use imported parts, creating a vicious cycle that remains unsolved, she stressed.

To untie the vicious cycle, Thuy proposed creating a larger market scale through importing completely built-up units (CBUs) in the first years and forcing manufacturers to find domestic spare parts with cheaper prices, thus stimulating the local supporting industry.

Businesses should also choose advantageous spare parts and products so as to gain assess to the ASEAN production chain, she added.

Nguyen Duong Hieu, Chairman and General Manager of LIDOVIT Trading and Industrial JSC, suggested local producers invest in upgrading their technology, and integrate management systems to better manage their production and approach the market.

He said that management agencies should provide local part suppliers with specific requirements of foreign firms so they can prepare to meet their standards.

Delegates also suggested that the Government set up a website for businesses in the parts industry so they can update their information, which would make it easier for downstream producers, including foreign ones, to find parts suppliers. 

The seminar was held by the HCM City Department of Industry and Trade, the Board of Management of Saigon Hi-Tech Park and HCM City Export Processing and Industrial Zones Authority. -VNA