Automobile makers in Vietnam cannot take advantage of the booming demand for cars of the people due to a sore lack of parts suppliers.

Auto sales in Vietnam have been on a sharp increase lately. According to data released by Vietnam Automobile Manufacturers’ Association, this year’s sales till the end of July stacked up to 123,978 units, up 35 per cent on-year. Imports in the period rose 24 per cent on-year to 39,889 units.

The demand is set to continue on its trend of growth in the upcoming period, according to a research produced by the Industrial Policy and Strategy Institute under the Ministry of Industry and Trade (MoIT) and presented yesterday at the conference on development of the automotive and auto parts industry in Vietnam organised by the Japan International Cooperation Agency and the MoIT.

According to the research, the “golden” population structure, consisting of a high percentage of young people, is going to last till 2030. 

Meanwhile, the middle class is going to expand, with income per capita levels increasing from $2,111 to an expected $3,000 per year by 2020.

Vietnam’s transport infrastructure is going to improve, with highways linking provinces and the north-south highway being completed, which is expected to make transport by personal vehicles easier. These factors all point to an increase in the demand.

The sharp increase in the demand poses great potential for the auto industry. However, car manufacturers in the country are poised to hit difficulties in expanding production because of a distinct lack of parts suppliers that are able to meet their standards.

Moreover, according to a recent research by Professor Kobayashi Hideo from Waseda University, most parts suppliers in Vietnam are of a small scale in terms of both capital and human resources.

Decree No.111/2015 /ND-CP issued by the government on growing the supporting industries outlined multiple incentives for companies in supporting industries, such as receiving partial financial support for research and development activities, or tax and import tariff cuts.

“These incentives should be modified a little bit so that it is easier for companies to access them,” said Truong Thanh Hoai, director of the MoIT’s Department of Heavy Industry.

Hoai said that the ministry is in the process of getting government approval on a programme to grow supporting industries from now to 2025. “We hope the programme is going to receive funding and be implemented soon,” he said.

All companies, domestic and foreign alike, will be eligible.

Vietnam is going to remove import tariffs on a host of products from the ASEAN bloc, including completely built units. The Vietnamese auto industry risks disappearing if its products cannot compete with imports.

VIR