Vietnam’s locally-made content ratio in autos is lowest in region

Vietnam has been persistent with its plan to develop an automobile industry of its own. However, the localization ratio remains at 10-15 percent, after years of development.

The updated report about Vietnam’s automobile industry released by VietinBank Securities (CTS) showed that Vietnam is one of four countries which have ‘relatively developed’ automobile manufacturing and assembling activities in the region.

Vietnam’s locally-made content ratio in autos is lowest in region

However, Vietnam has the lowest localization ratio, 10-15 percent, much lower than the 70 percent of Thailand, Indonesia and Malaysia, which have larger markets than Vietnam.

Vietnamese auto enterprises mostly import car parts from regional countries, China and the car-brand holding countries for domestic assembling.

While Thailand has 710 first-class and 1,700 second-class vendors, Vietnam only has 33 and 200, respectively. There is no well-known vendor.

In fact, it is impossible to develop a value chain with domestic enterprises only. In Thailand, for instance, foreign first-class vendors account for 58 percent which include big names such as Bosch, Magna, Denso, Toyota Soshoku and Toyota Gosei.

Car parts are mostly made of iron and steel, while Vietnam still cannot be self-sufficient in steel supply for production. The parts with strength and heat resistance requirements such as gear box and engine must be made of special materials such as aluminum alloy and iron which is 3-5 times stronger than structural steel.

Car parts are mostly made of iron and steel, while Vietnam still cannot be self-sufficient in steel supply for production. The parts with strength and heat resistance requirements such as gear box and engine must be made of special materials such as aluminum alloy and iron which is 3-5 times stronger than structural steel.

According to Toyota Vietnam, the low locally made content ratio increases automobile production costs in Vietnam by 10 percent more than in other regional countries.

Meanwhile, according to BMI, the production cost of Ford Fiesta in Vietnam is 20 percent higher.

 

Decree 116 which took effect in early 2018 is considered a technical barrier to protect the domestic automobile industry.

Under the decree, all consignments of cars imported to Vietnam must undergo safety and emission examination. Previously, only the first consignment of every model was examined.

Vietnam has only one agency in charge which takes a long time to examine car imports.

A source said the use of technical barriers to protect domestic production has encountered reactions from other countries. CTS believes that Vietnam will have to think of other solutions to bring advantages to the domestic industry.

The Ministry of Industry and Trade’s report showed the rapid development of the domestic automobile industry.

In 2018, Vietnam produced 250,000 cars, satisfying 70 percent of demand. There are 40 enterprises involved in the production and assembling process, but most of them are small and medium sized.

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Thanh Lich

 
 
 
 
 
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