Enhancing support industry for automobile sector

The Vietnamese automobile industry has failed to achieve many targets due to its weak support industry. Therefore, the sector needs to concentrate on manufacturing auto components and spare parts for both domestic sale and export.

Low localization rate

Vietnam began to develop its automobile industry in 1990 mostly by shifting from manufacturing and assembling motorcycles to assembling autos. This explains the slow development of the Vietnamese automobile industry for a long period, with actual local content of trucks, vans and cars much lower compared with the targets of 40 percent set for 2005 and 60 percent for 2010.

Regarding weaknesses of the Vietnamese automobile sector, Nguyen Thi Xuan Thuy from the Industrial Policy and Strategy Institute under the Ministry of Industry and Trade, said the cost of auto manufacturing in Vietnam is about 20 percent higher compared with other ASEAN countries. Due to its underdeveloped support industry, the industry still has to import various kinds of components.

Most of Vietnamese businesses in the support industry are small to medium in size and just capable to manufacture simple spare parts such as mirrors, glass, seats, electrical wires, battery, and plastic details.
Toyota Vietnam currently takes the lead in localization rate. Among 18 businesses currently supplying components for auto businesses, 16 are foreign invested and just two are domestic companies, Nguyen Thi Xuan Thuy said.

Increasing market capacity

According to Professor Kobayashi Hideo from the Waseda University (Japan), Thailand is now the largest auto manufacturer in ASEAN with annual output of more than 1.9 million autos; Indonesia ranks second with more than one million autos, and Malaysia stands at the third position with 800,000 autos. The Philippines and Vietnam are almost equivalent with annual output of about 250,000 autos. “Vietnam needs to create favorable conditions for motorcycle component and accessory manufacturers to shift to manufacturing components and accessories for both motorcycles and automobiles. This shift should be considered an advantage of the Vietnamese automobile sector,” he said.

Nguyen Thi Xuan Thuy affirmed that the development of qualified domestic component and accessory suppliers is crucial to the development of the Vietnamese automobile sector.

Ministry of Industry and Trade’s Heavy Industry Department Director Truong Thanh Hoai:

Vietnam will concentrate on manufacturing small-sized and environmentally friendly automobiles. Despite the competition with other ASEAN countries when import taxes are reduced to zero percent by 2018, there will be room for the Vietnamese automobile sector to develop.

Lan Anh / ven.vn