VietNamNet Bridge – A lot of automobile manufacturers are considering stopping assembling cars in Vietnam and shifting to distribute cars in the market. If so, Vietnam would not have its automobile industry, and the forecast car price reductions would be far away.

Only big difficulties ahead

Automobile manufacturers have been told that they would have a vast market. It is expected that by 2025, Vietnam would need 900,000 cars, while the figure may rise to 1.8 million by 2030.

However, in the immediate time, the manufacturers say a very tough period is expecting them ahead.

From 2014, the CBU (complete built unit) car tariff on the imports from ASEAN would be cut to 50 percent. The tariff would be cut further to 35 percent from 2015 and 20 percent from 2016, to 10 percent from 2017 and zero percent from 2018.

Analysts have commented that the tariff cut to 50 percent by 2014 would be enough to help make some import models competitive in terms of price with domestically assembled products.

Meanwhile, the government still keeps silent about the new policy for the domestic automobile industry development.

Guarav Gupta, General Director of GM Vietnam, complained that since the government has not made public the plan to encourage the development of the automobile industry, investors still have to keep waiting and listen for the news. They cannot draw up their long term business plans until they can see the details of the tax policies for the period from now to 2018, the time by which Vietnam has to cut the tariff to zero percent, and the period after 2018.

In the latest move, the Ministry of Industry and Trade, which drafted the automobile industry development plan by 2020 with the vision until 2030, suggested the sharp reductions in taxes and charges.

However, the tax reductions have not made automobile manufacturers happy. They said that if the reductions are applied to both domestically made cars and imports as suggested, this would not help the existing automobile manufacturers in Vietnam exist and develop.

Waiting in the risk

The unclear and unstable policies, and the high taxes, are believed to be the biggest obstacles to the development of the Vietnam’s automobile industry.

The supporting industries in Vietnam are better off, but experts say, they are far from being as good as Thailand’s or Indonesia’s. There are only 210 car part providers in Vietnam, but they can only made simple parts in small quantities.

The number of Vietnamese car part suppliers is just equal to 1/5 of Indonesia, 1/8 of Malaysia and 1/50 of Thailand.

Vietnam once planned to follow other ASEAN countries by focusing on the strategic car lines, the policy which has helped the countries make big leaps in developing their automobile industry. Its relevant agencies discussed the development of key car products four years ago, but no policy had been laid down.

Meanwhile, the automobile manufacturers have been going the way which is contrary to what the government of Vietnam wishes to see. They have launched more car models to the market, while having restricted the investments to increase the locally made content proportions.

Analysts have noted that no big investments have been made by the investors in Vietnam over the last 10 years. Most of the new investment deals are small, less than $15 million. Meanwhile, tens of new car models are marketed every year.

Tran Thuy