VietNamNet Bridge – French-backed car maker Renault may build a factory to directly manufacture cars in Vietnam in order to benefit from slashed import tariffs within the ASEAN Economic Community.

Renault may plan to manufacture cars in Vietnam to take advantage of the AEC’s slashed import tariffs

Xavier Coiffard, general director of France’s Auto Motors Vietnam, the exclusive importer of Renault cars in the country, told VIR that “it is likely that Renault will consider directly manufacturing cars in Vietnam in the medium term.”

Under the ASEAN Trade and Goods Agreement, the import tariff will drop from 50 per cent in 2015 to 40 per cent in 2016 for 77 per cent of tariff lines on completely built-up (CBU) automobiles imported from ASEAN countries into Vietnam.

These tariff lines will fall to 30 per cent in 2017 and 0 per cent in 2018.

“Currently, Renault has no manufacturing facilities in ASEAN. However, we are planning to build a factory in the region in order to benefit from tariff incentives,” Coiffard said, stressing that “Vietnam is expected to be selected for the location of this factory. Renault will also open new dealerships and offer more after-sale services.”

Over the past five years, Renault has been exporting cars to Vietnam, reporting a significant growth in revenue. Last year, it sold over 150 units, with a year-on-year 30 per cent rise in revenue.

Currently, Renault has seven showrooms in Vietnam marketing six car models including Koleos, Duster, Latitude, Logan, Megane, and Sandero.

Renault’s business analysis shows that Vietnamese customers are generally attracted to brands that already have an established presence in Vietnam. However, customers are now becoming open to purchasing more modern cars, and take into consideration factors such as quality and after-sales services when making a purchase.

This new trend has created an opportunity for many new players in the automotive industry to enter the Vietnamese market.

“Vietnam is an important step in our expansion, as it has huge market potential due to its fast growing automotive sector,” Coiffard said.   “We want to be a leading European brand in Vietnam.”

Despite having a population of more than 90 million people, only 1.85 per cent of people in Vietnam own cars, according to Coiffard.

However, under Vietnamese government regulations, cars are listed as luxury items and are therefore subject to extremely high special consumption and import tax rates. For this reason, the prices of imported cars are higher than those of locally-made cars. These cars are also often sold at a far higher price in Vietnam than in other nations due to the high import tax.

“Renault hopes that the government will consider reducing its import tax rates, which will give Vietnamese customers the opportunity to purchase high-quality cars,” Coiffard said.

“Currently, Renault maintains a strategy of importing CBU cars into the country,” he added.

Recently, Renault and eight other world-famous automobile brand names, including Germany’s Audi, Porsche and BMW; the UK’s Jaguar, Land Rover and MINI; and China’s BAIC and Luxgen established an association for CBU automobile importers.

“The association hopes to create a fair market that encourages healthy competition,” Coiffard said.

VIR