return icon Vietnamnet.vn

Automobile industry: localization ratio still low, price still high

After 25 years of development, the automobile industry has failed to reach its localization ratio goal, while cars in Vietnam are more expensive than other regional countries.

Market size

Nguyen Trung Hieu from Toyota Vietnam said that the manufacturer wants to increase the localization ratio and reduce car prices, but is facing difficulties.

 

 

{keywords}

 

According to Hieu, the scale of the automobile industry is based on three factors – the market, manufacturers and suppliers.

Regarding market size, only 400,000 cars are bought each year, just one-third of Thailand and Indonesia. The production scale in Vietnam is just one-tenth of the two countries because Vietnam is tens of years behind them and still lacks experience.

He explained that in the automobile industry, if the output is small, the prices will be high even if the car parts are localized. In other words, the localization will be effective if the output is high.

“The car prices in Vietnam are higher than imports. This is because the production cost is not competitive,” he explained. “CKD (complete knock down) production cost is 10-20 percent higher becaue manufacturers have to import many car parts."

In 2010, one Toyota Vios G had the selling price of VND550 million. After 10 years, the same version sold at VND570 million. If calculating the prices in dollars, the car was priced at $29,000 in 2010 (1US$ = VND18,932), and is $24,500 in 2020 (1US$ = VND23,220).

In the past, Vietnam set the goal of obtaining a localization ratio of 60 percent by 2010. But the real ratio was just 7-10 percent. The figure rose to 20 percent in 2019. Meanwhile, Thailand and Indonesia surpassed the 40 percent threshold a long time ago.

A report showed that in 2010-2017, Vietnam imported $2 billion worth of car parts, mostly from Japan (23 percent), China (23 percent), South Korea (16 percent) and Thailand (16 percent).

Domestic automobile manufacturers are feeling pressure from imports. Since January 2018, the imports from ASEAN with 40 percent of ASEAN sourced content can enjoy a preferential tariff of zero percent under ATIGA.

In the future, imports from Europe will enjoy a zero percent tariff under EVFTA (EU-Vietnam Free Trade Agreement) and IPA (investment protection agreement).

Vietnam still going ahead

 

Domestic automobile manufacturers are feeling pressure from imports. Since January 2018, the imports from ASEAN with 40 percent of ASEAN sourced content can enjoy a preferential tariff of zero percent under ATIGA.

 

Experts all say that the automobile industry will develop if supporting industries can develop.

Hieu from Toyota Vietnam said the manufacturer has been looking for domestic car part vendors.

“You may think that automobile manufacturers just need to place orders, and vendors will have to come to negotiate with them. But in fact, we have to accompany them from the very beginning to the time when they enter stable production period,” he said.

This is because the market is still too small and the number of orders is not attractive for investors to organize production.

Thaco, a 100 percent Vietnamese owned automobile company, decided not to stay in one place and wait for vendors to come, but to make car parts.

Thaco has 12 companies specializing in making car parts for assembly in Chu Lai IZ. The products bearing Kia brand assembled by Thaco have localization ratios of 20-30 percent.

In late 2019, the enterprises exported the first consignments of Kia Cerato products with the localization ratio of 40 percent to Myanmar.

It plans to export 1,026 products of different kinds, including Kia Cerato and Sedona to Thailand and Myanmar in 2020.

Toyota Vietnam reported that from 1997 to 2020, it had 38 domestic vendors who provide 700 car parts. Thaco has about 200 vendors. Vinfast, a newcomer, has also been investing to develop its own supply chain.

However, the figure is too small if noting that one car has 20,000-30,000 parts. 

Chi Bao

VN automobile industry: new circumstances offer opportunity

VN automobile industry: new circumstances offer opportunity

Vietnam now has a new opportunity to develop its automobile industry. If the chance is missed, the country will become an automobile import market.

Vietnam to change tax, customs policy to encourage automobile industry

Vietnam to change tax, customs policy to encourage automobile industry

Developing an automobile industry is a part of the strategy to turn Vietnam into a modern and industrialized country by 2030. More preferences for the industry will be offered in the time to come.

MORE NEWS

Power shortage worries increase hunger for coal

Vietnam is maximising its coal mining output amid widespread power outages in the north.

Indicators ripe for wave of tech startup successes

Venture capital investment flows into Vietnam, particularly from Singapore, are on track to surpass the previous level, propelled by the country’s buoyant tech startup scene.

Tourism industry faces serious labor shortage

Because of low pay, many workers have left the tourism sector.

Industrial parks, economic zones absorb US$ 230 billion in foreign direct investment

Industrial parks (IPs) and economic zones (EZs) across the country have attracted nearly 11,000 foreign direct investment projects worth US$230 billion, according to Deputy Minister of Planning and Investment Tran Quoc Phuong.

Property, fishery sectors face hardship as credit chokes

At a government-to-business conference held yesterday, representatives of business associations expressed their concern over being unable to access bank loans as banks are running out of credit growth quotas.

Utilising every opportunity to grow and overcome challenges

That is the message and guideline of Minister of Planning and Investment Nguyen Chi Dung at the national conference on how to sustainably develop.

Outbound tours to Europe rocked by passport tangle

A number of Vietnamese outbound travel companies have already been affected by the decision of some European nations to not recognise Vietnam’s new passports.

Young people discover the universe via telescopes

Many young people have been spending time and money to buy telescopes and build rooftop observatories to admire the wonders of the universe.

Ample room remains for Vietnam’s exports to EU

There is still a lot of room for Vietnamese goods to expand their presence in the European Union (EU) market, but accessing its retail distribution systems is extremely important, heard a seminar in Ho Chi Minh City on August 11.

Vietnam yet rolls out Covid jabs for under-5s

Vietnam has yet planned to get younger kids aged under five vaccinated against COVID-19, according to the Ministry of Health (MoH).

Vietnam to host Mekong Tourism Forum in October

Vietnam is scheduled to host the 2022 Mekong Tourism Forum, themed “Rebuild Tourism, Rebound with Resilience”, from October 9 – 14, the first in-person meeting of the six Greater Mekong Subregion (GMS) destinations since the pandemic began in 2019.

Cryptocurrencies show high risks

Even though cryptocurrencies are not legally recognized in Vietnam, they have gradually become popular due to unlawful trading via specific platforms.

Pandemic-hit labourers continue to receive financial support

The Unemployment Insurance Fund plans to pay out 1.15 trillion VND (49.15 million USD) to support labourers affected by the COVID-19 pandemic, according to a resolution issued by the National Assembly (NA) Standing Committee.

Seven petroleum wholesalers’ licenses suspended

The Ministry of Industry and Trade suspended the operating licenses of seven key petroleum import and export businesses after inspecting 33 wholesalers in February this year.

President reduces death penalties to life sentences for 21 prisoners

President Nguyen Xuan Phuc on August 12 decided to reduce death penalties to life sentences for 21 prisoners, including two foreigners.
back_to_top