VN car industry still stuck in reverse

Vietnam's automobile industry has failed to reach its objective of selling cars at prices to suit Vietnamese pockets.
Vietnam's automobile industry has failed to reach its objective of selling cars at prices to suit Vietnamese pockets.

The remark was made by the Director of the Industry and Trade Ministry's Heavy Industry Department, Nguyen Manh Quan.

Prices were still high compared with those in other regional countries, Quan said at an online seminar held by Cong Thuong (Industry and Trade) newspaper on August 22.

"The cost of cars in Vietnam is about 20 percent higher than in other ASEAN countries because domestic output is low and most assembly lines are operating at about 50 percent of capacity," said Quan.

Vietnam 's automobile industry involves such big names as Toyota, Ford, Nissan and Mercedes.

There are 18 FDI and 38 domestic businesses making and assembling cars. They have a capacity of about 460,000 vehicles a year.

The sector pays more than 1 billion USD in taxes annually and creates job for about 80,000 people.

At the seminar, experts said the industry was so sluggish because of the low rate of making parts locally, and high taxes and fees.

Quan said the localisation rate has risen from 7 to 10 percent for small car and 35-40 percent for light-duty trucks, but this is still very low compared with the target.

To buy a car, Vietnamese have to pay eight types of taxes and fees, including import tax, special consumption tax, VAT, vehicle owner registration fee, car registration fee, car number granting fee and road transport fee.

Experts are worried that by 2018, when Vietnam fully joins in the ASEAN Free Trade Area, the tax on imported cars will be zero.

This means that if the Government does not change its policies, the domestic industry will fail to compete with others in the region.

CEO of Ford Vietnam and chairman of the Vietnam Automobile Manufacturers Association Jesus Arias said his members want a concrete itinerary for industry development from now until 2018 so that they could set up business plans.

Arias said stable policies helped enterprises to predict outcomes so that they could set up parts suppliers who could join in the global network.

To achieve this, the industry needs to produce a specific number of cars. To make a car, thousands of parts are needed. No car maker can produce all parts by themselves, said Arias.

To develop, a sizable market is needed and proper policies to attract investors.

Head of the Industrial Policy and Strategy Institute Duong Dinh Giam said the Government is determined to develop the car industry.

"Automobile development is an indispensable trend of every nation when average incomes reach 3,000 USD a year or more. Therefore, we need to take advantage of this trend," said Giam.

The average income of Vietnamese is estimated to hit 1,900 USD per head this year, according to a recent report from the General Department of Statistics.

The Vietnam Transport Development Strategy approved in February plans to have about 3.2-3.5 million vehicles on the road by 2020, compared to nearly 1.65 million at present.-VNA

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