An automobile manufacturing line of Vinfast in the northern city of Hai Phong (Source: VNA) Hanoi (VNS/VNA) - The automobile industry of Vietnam has witnessedprogress in the last two years, but the localisation rate (local part supply)still remains low, not meeting the set target, according to a Ministry ofIndustry and Trade (MoIT) report sent to the National Assembly for discussionand direction.
The report shows that the volume of domestically-assembled cars was250,000-260,000 units in 2017 and 2018, of which several types have beenexported to foreign countries including, Laos, Cambodia, Myanmar and CentralAmerica. The industry has contributed billions of US dollars to the Statebudget, contributing to reducing the trade deficit and creating jobs for morethan 120,000 workers.
However, the localisation rate for cars with nine seats and fewer has reachedabout 7-10 percent, concentrating on tyres, seats, mirrors, glass, electrics,batteries and plastic products. Meanwhile, the Government’s target was set at40 percent in 2005 and 60 percent in 2010.
MoIT said that up to 80-90 percent of the main raw materials for componentsproduction such as alloy steel, aluminium alloy, plastic beads and hi-techrubber are currently imported. Every year, businesses have to import about 2-3.5billion USD worth of parts and spare parts for production, assembly and repairof vehicles. Meanwhile, the localisation rate of regional countries hasaveraged 65-70 percent. Thailand alone hits 80 percent.
“If domestic automakers do not soon put in place effective solutions to improvelocalisation rates, it will be difficult to compete in the regional market,”said the report.
“The domestic market is small, with consumption of more than 300,000 vehicles[including imported ones] per year, while the number of manufacturing andassembling enterprises is high with 56 units so it has not been attractive forbusinesses to invest in the support industry.”
In the report, the ministry also emphasised the need to promote the developmentof the automobile and support industry, in which enterprises can make use ofits solutions and policies offered by the automobile industry projects ofdomestic automakers such as Truong Hai Automobile Company (Thaco), Thanh Cong Group,VinFast and others.
The ministry said it was planning to submit to the National Assembly amendmentsto the application of special consumption tax on cars with a high localisationrate (no tax on locally-manufactured parts).
The ministry has built a pilot part supply chain for automobile manufacturersand assemblers at home and abroad, and studied mechanisms and policies toattract investment from multinational corporations investing in large-scaleprojects in Vietnam, especially those focused on the brands and models notexisting in ASEAN, in order to create conditions for local enterprises toparticipate deeply in multinational automobile production chains.
According to a ministry report, there are more than 300 enterprises of thecountry’s total 1,800 parts and spare parts manufacturing enterprisesparticipating in the production network of multinational corporations, of whichautomobile manufacturing and assembly industry reached 7-10 percent, theremainder being the textile and footwear industry with 40-45 percent,electronics and telecommunications with 15 percent and specialised electronicsand high-tech industries with 5 percent.
Chief Representative of Japan External Trade Organisation (JETRO) HironobuKitagawa said at a signing ceremony of co-operation between Reed Tradex Vietnamand Jetro held in Hanoi recently that in 2018, the number of investmentprojects from Japan into Vietnam reached the highest level of 630 projects withtotal investment of about 8 billion USD.
He said nearly 70 percent of Japanese enterprises had invested in Vietnam,responding that "They want to expand their business, however, one of thedifficulties is the low localisation rate of materials and parts.”
“The localisation rate of Japanese enterprise in Vietnam is 36.3 percent, lowerthan China's rate of 66 percent and Thailand's rate of 57 percent. Therefore,our enterprises are forced to import from other countries like Thailand andChina," Kitagawa said.
“This is the main cause of increased costs and great risks for Japaneseenterprises operating in the manufacturing sector in Vietnam, and also thecause of difficulties in maintaining middle and long-term investments in thecountry," he added.
The JETRO representative also said that restrictions on mechanisms and policiesto support the development of small and medium enterprises were one of theexisting problems in Vietnam. – VNS/VNA
VNA
