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Automobile support industries still sluggish

VietNamNet Bridge - The import tariff on cars with fewer than 9 seats from ASEAN countries has been cut to zero percent, but the car prices do not decrease, but are even higher than previously.

VietNamNet Bridge - The import tariff on cars with fewer than 9 seats from ASEAN countries has been cut to zero percent, but the car prices do not decrease, but are even higher than previously.


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Low localization ratio

Luong Duc Toan from MOIT, Vietnam’s automobile supporting industries can only make simple car parts with low technology content and added value such as components of chassis, cabin cover, car door, tire, electric wire and wheel rim. The locally made content of automobile products remains very low.

A report from the ministry shows that there are 358 enterprises related to automobile manufacturing, including 50 assemblers, 45 chassis, car body and bodyshell makers and 214 component producers. The number of component manufacturers, according to Tung, is low compared with Thailand, with 2,500 enterprises.

Deputy director of Toyota Vietnam Shinjiro Kajikawa said the car production cost in Vietnam is 10-20 percent higher than CBU (complete built unit) cars imported from ASEAN countries because of the small output of supporting industries and low localization ratio.

The locally made content in passenger cars assembled in Vietnam just accounts for 10 percent, while the figures are in 85 percent in Thailand, 80 percent in Indonesia and 75 percent in Malaysia.

Toan said the Vietnamese market is small where there are many assemblers and many different car models. Therefore, investors are reluctant to make investment to develop massive production. 

Meanwhile, Nguyen Thuong Lang from the Hanoi Economics University, said the problem lies in enterprises.

“The government has given optimal support, while enterprises’ efforts are not big enough,” he commented. 

“If enterprises cannot take full advantage of the government’s support, foreign invested enterprises will be dominant,” he warned.

Consumers 

In 2016-2017, Vietnamese hoped that the car prices would decrease in 2018 thanks to the import tariff cut to zero percent. However, the hope has been dashed.

Contrary to all predictions, imported cars have become scarce, while the prices of both imports and domestically made products have increased. Local newspapers reported that customers have to book cars many months in advance. 

Decree 116 which took effect in early 2018, with stricter regulations, was believed to block the way for imports to enter Vietnam in the first months of 2018. Later, though the stricter requirements have been satisfied by enterprises, the imports are still coming in dribs and drabs.

Kieu Minh Tri in district 4, HCMC, said he had to buy a Fortuner of Toyota for VND50 million more than last year. He also had to spend nearly VND100 million more to buy the car parts offered by sale agents to be able to get delivery promptly.


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