Many experts at home and abroad pointed to the ailing supporting industries as the key reason why car prices in Vietnam are much higher than in other regional countries at the 15th Vietnam International Exhibition on Automobile and Transportation and Supporting Industry (Vietnam AutoExpo 2018) in Hanoi City on June 7, Sai Gon Giai Phong newspaper reports.

Exhibition participants inspect spare parts of motorbikes and automobiles in HCMC. The rate of local contents accounts for around 7-10%, far beyond the target of 40% set decades ago

The common voice at the seminar was that local car prices were between 20% and 80% higher than the regional level due to underdeveloped supporting industries and high import tariffs.

Tariff barriers were significantly removed in late 2017 and early 2018. Since then, the local auto market has seen drastic changes, with many major automakers cutting prices of their popular car makes by VND50-100 million (US$2,190-4,384) a unit, said Le Huy Khoi, head of Research and Market Forecast Division at the Industrial Policy and Strategy Institute.

He added these price declines have yet to satisfy local customers, as such prices are still far higher than those in other ASEAN countries.

Locally-made completely-built-up (CBU) cars have high prices, mainly due to small production scales and low local contents, according to Do Huu Hao, chairman of the Vietnam Society of Automobile Engineers.

He said domestic automakers have no way but to import most auto parts because local supporting industries have remained underdeveloped. The ratio of local content accounts for 7-10%, way below the 40% target set decades ago, and production of auto parts is largely limited to simple items like windshields, mirrors, tires and tubes, and painting.

Meanwhile, the average rates of local contents in other regional countries range from 65% to 70%. Notably, the figures in Thailand and Malaysia amount to 80-90%.

Vietnam has around 70 companies specializing in auto parts. However, most of them have small production scales and low production value.

A representative of the Taxation Policy Department under the Finance Ministry said tariffs make up a significant proportion of car prices. Current tax policies towards imported CBUs are designed to support the development of the local auto industry.

However, such tax policies would put local customers at an unfair disadvantage. They purchase either locally-made cars of low quality but at high prices, or high-quality imported vehicles at prohibitively high prices, according to many experts.

In a Vietnam News Agency report, Khoi of the Industrial Policy and Strategy Institute forecast the Vietnamese automobile market could reach 750,000-800,000 and 1.7-1.85 million vehicles by 2025 and 2030 respectively, compared to roughly 250,000 units a year now.

He said the forecast takes three factors – production scale and population; income per capita; and the average number of cars for every 1,000 residents – into careful consideration.

However, Deputy Minister of Industry and Trade Do Thang Hai gave a lower-demand prediction, saying that the number of new cars sold on the local market could range from 466,000 to 863,000 by 2030.

Hai stressed there are favorable factors behind the growth of the local auto market. As such, there is great potential for local businesses to be involved in auto investment and business activities.

SGT