VietNamNet Bridge - Despite failure in developing an auto industry in the last two decades, Vietnam still dreams of building an industry of its own. However, If new policies benefit importers, automobile joint ventures would shift to focus on sales instead of manufacturing.

Analyst have warned about the risks in opening the Vietnamese market for CBU (complete built unit) imports from SE Asia from 2018. With a zero percent tax rate, CBU cars from Thailand and Indonesia are expected to dislodge domestically assembled cars thanks to competitive prices.

At present, car part imports are taxed 10-30 percent while CBU imports are taxed 30 percent and will be taxed zero percent from 2018. 

“With such a tax policy, domestic enterprises won’t be able to make cars,” said Tran Ba Duong, president of Thaco, a 100 percent Vietnamese owned automobile manufacturer. 

Only if the car part tariff is cut to zero percent will domestic products be able to compete with imports.

In fact, experts years ago warned that they could see a growing tendency of domestic automobile manufacturers shifting to import products for sale instead of making cars themselves, blaming this on inconsistent policies. 

Despite failure in developing an auto industry in the last two decades, Vietnam still dreams of building an industry of its own. However, If new policies benefit importers, automobile joint ventures would shift to focus on sales instead of manufacturing.

As the domestic market is still small and CBU imports can enjoy preferences, domestic automobile manufacturers would rather give up production to shift to trading.

Nevertheless, Vietnamese policy makers still believe that developing an automobile industry is necessary for a country with 90 million people, because it can create 100,000 jobs and ease the trade deficit. 

That is why the government, when compiling the amended investment law, has included automobile production on the list of conditional business fields.

An analyst said that if the auto industry develops, it would encourage enterprises to invest in production, which would bring other socio-economic benefits, including the development of support industries and local economies’ growth. 

“Though we don’t have much time from now to 2018, I still believe that Vietnam will be able to build an automobile industry which can make products for domestic consumption and export to ASEAN, if the government can create reasonable policies,” Duong said.

The low localization ratio in the automobile products made in Vietnam is one of the factors that discourages policymakers. However, experts have said this needs to be reconsidered.

Thailand doesn’t have any automobile brand of its own, but it is still considered a ‘SE Asia’s Detroit’. “Therefore, Vietnam should feel satisfied if it can join the giant manufacturers’ global value chains and satisfy the requirements,” an expert said.

Chi Mai