VietNamNet Bridge – The members of the Vietnam Automobile Manufacturers’ Association (VAMA) now tend to import cars from AFTA countries for domestic sale instead of assembling cars themselves.

Only from 2018, or after five years, will the cars from ASEAN countries enjoy the preferential zero import tariff when entering Vietnam. However, domestic automobile manufacturers have thought of importing cars to sell in the domestic market already.

Toyota Vietnam, which always leads the Vietnamese market in terms of sales, has announced it would bring Lexus to Vietnam this year. Lexus models are expected to be displayed at the Vietnam Motor Show 2013 in HCM City in October.

Honda Vietnam, which has been succeeding with City model marketed in June 2013, is also considering importing cars.

According to Tomohiro Maruto, a senior executive of Honda Vietnam, the manufacturer has got 1,600 orders for City while it had delivered 300 cars by the end of August. Meanwhile, Honda has been preparing well for the import of Accord cars, slated for the end of the year.

Mitsubishi has announced it would launch two small sized models into the market by the end of 2013. The two models, to be introduced at the motor show in October, would target women.

Meanwhile, Ford Vietnam has imported Ranger, a pick-up model from Thailand.

As such, a lot of the members of VAMA have been importing and increasing the import of cars. In 2012, though only 92,000 cars were sold, a decrease of 33 percent over 2011, automobile joint ventures still continuously expanded their distribution networks. This is believed to be a preparatory step for them to import cars in large quantities from ASEAN countries, once the import tariff is cut to zero percent.

Deputy General Director of Vinastar which makes Mitsubishi brand vehicles, said that when the AFTA integration process comes into full effects, manufacturers would have to think between assembling and importing cars and choose the better way to follow.

Currently, ASEAN cars mostly come from Thailand and Indonesia. However, in the near future, the cars would also come from South Korea, China and Japan as well.

The three countries are not ASEAN’s members, but they all have trade agreements with ASEAN, under which by 2018, the import tariff would be lowered to five percent.

Once the tariff reduces to zero percent (for the ASEAN sourced cars) and five percent (for the cars sourced from ASEAN’s partners), the imports would flood the Vietnamese market. By that time, auto joint ventures would have to reduce the selling prices to compete with the imports.

However, analysts said the price reduction is nearly impossible, as the car part import tariffs imposed by Vietnam remain relatively high, while other regional countries such as Thailand and Indonesia now enjoy the zero percent rate.     

Meanwhile, automobile manufacturers cannot find the car parts they want from domestic sources. Yoshihisa Maruta, General Director of Toyota, whose some models have the high localization ratios of nearly 40 percent, has admitted that the production costs in Vietnam are higher than that in Thailand and Indonesia.

All these factors mean that the production costs would remain high, while the massive imports would force the market prices down. If so, auto manufacturers would rather import cars to sell domestically than assembling cars themselves.

DNSG