return icon

Vietnam needs long-term vision to develop automobile industry: experts

After 30 years of development, Vietnam’s enterprises can only make 287 car parts, which are mostly simple products. The industry uses a large amount of labor and has low added value and high production costs.


An August report from the Ministry of Planning and Investment (MPI) about the list of machines, equipment and spare parts, specialized transport vehicles, materials and unfinished products made domestically, showed that 287 car parts can be made in Vietnam. These include 269 car parts for less-than-9-seat cars and 18 for other types of vehicles.

The car parts are mostly simple products, which need many workers to be made. The list released by MPI doesn’t include high-technology products, such as acceleration sensor, auto body system equipment, and air conditioning.

After 30 years of development, from August 1991, when the first automobile joint venture (VMC) was established, the automobile industry is still in the very early stage of development with only simple, low added value car parts made.

According to Ministry of Investment and Trade (MOIT), there are 10 personal car OEM (Original Equipment Manufacturer) in Vietnam, namely Toyota, Honda, Suzuki, Mitsubishi, Ford, Mercedes Benz, Thaco, TC Motor and VinFast. The manufacturers do CKD assembling with production lines comprising four major stages - welding, painting, assembly and testing. Some manufacturers, including Toyota, VinFast and Thaco, do one more thing – making bodywork.

In the supply chain, there are only 18 first-class vendors and 58 second- and third-class vendors. Some vendors supply both motorbike and car parts. The car parts made in Vietnam have production costs 2-3 times higher than in Thailand and Indonesia.

Analysts pointed out that Vietnam’s automobile industry cannot develop as expected because of the lack of reasonable policies. In the last decades, the policies just encouraged assembling, not manufacturing.

Vietnam imposes very high taxes on CBU (complete built unit) imports, and low import tariffs on sets of car parts. This allows assemblers not to have to compete with CBU imports, and they tend to import sets of car parts for domestic assembling.

One automobile enterprise just needs to install an assembling line with the capacity of 10,000 products per annum for the four final stages of manufacturing – yielding, painting, assembling and testing. And then import all the car parts needed to assemble cars for sale to make big profits. As a result, the domestic production of car parts has no opportunity to develop.

Meanwhile, Indonesia since 2000 has been pursuing a policy which taxes imported car parts and exempts tax from car parts made domestically. The enterprises which use more domestically made car parts will be able to make cars with lower costs and higher competitiveness. The policy encourages enterprises to use the car parts made domestically.

Experts believe that the small scale of the automobile market is the most important reason behind the underdevelopment of the automobile industry. The 10 OEMs have total designed capacity of 500,000 products a year, while real output is just half.

The small scale of the domestic market is blamed on sky high taxes and fees which push production costs up.

The 2019 population and housing census conducted by the General Statistics Office (GSO) found that only 5.7 percent of households have private cars.


According to enterprises, the low output makes investors reluctant to invest in supporting industries. To make front bumper, rear bumper and Taplo panel for one car model, investors need to spend $12 million, and they can expect investment capital recovery after five years.

It’s estimated that investors need to obtain output of 60,000 products a year and turnover of $3.8 million to be able to recover the investment capital. Meanwhile, in Vietnam, the capacity of Toyota Vios, the one with highest output, is just 30,000 products per annum.

Car part production is listed among the industries that receive investment incentives. However, the incentives are just the same as other industries, which are not that attractive.

Le Duong Quang, Chair of VASI (Vietnam Association for Supporting Industries), said the Government in the last 30 years has been consistently developing the automobile industry, but the policies are inconsistent with the strategy.

The weakness of Vietnam in policies is the lack of long-term vision and the weak capability of anticipating events in the future. The policies are inconsistent, unpredictable, unsystematic and unclear. 

Tran Thuy

Vietnam’s automobile supporting industry remains underdeveloped

Vietnam’s automobile supporting industry remains underdeveloped

Only a few spare parts are produced domestically, forcing domestic manufacturing and assembling enterprises to import automobile spare parts from other sources, experts said.

Ministries want to amend luxury tax policy to ease automobile prices

Ministries want to amend luxury tax policy to ease automobile prices

The prices of domestically assembled automobiles are expected to go down once the luxury tax policy is amended. Strategic small-capacity and fuel saving models will be given priority.  


Glass-walking bridge in Moc Chau wins Guinness world record

The Guinness World Records has announced that the Bach Long (White Dragon) glass walking bridge in Vietnam's northern province of Son La is the world's longest glass-bottomed bridge.

High costs and legal impasses hinder LNG energy development in Vietnam

Too many variables and over-reliance on imports have been hindering Viet Nam's plan to build power plants running on liquefied natural gas (LNG), industry experts have said.

Three Vietnamese military officers awarded UNHQ medal

The United Nations on May 26 awarded its medal to three officers of the Vietnam People’s Army who are working at this organization’s headquarters in New York, USA, on Peacekeeper’s Day (May 29).

Trade revenue set to eclipse 700 billion USD this year

Free trade agreements (FTAs) spurred Vietnam’s bilateral and multilateral trade, with 2022 revenues projected to hit a record 750 billion USD, according to experts.

Government takes action to protect wild birds

Deputy Prime Minister Le Van Thanh has signed a directive to protect migratory and wild birds in Vietnam.

Quang Nam man owns 2,000 antique gardening tools

Collecting old items is how 47-year-old Tran Van Phuc from Quang Nam province describes the previous daily life of the working class to the younger generation.

Tourism booms as people are anxious to travel after Covid lockdowns

Since March, many families have booked long-distance tours for the summer now that the economy has reopened.

Mekong Delta farmers back away from rice as input costs rise

Rice farmers in many Mekong Delta provinces are reducing rice cultivation over rising prices of inputs like fertilisersnbsp;and pesticides.

Mural depicting VN, US’s friendship inaugurated

A ceramic mural, US-VN Friendship, has been inaugurated at the new US-Vietnam Co-operation Centre in Hanoi.

New pact promotes Vietnam-Europe fashion links

Culture, lifestyle and fashion links between Vietnam and Europe will be promoted under a Memorandum of Understanding signed this week by the European Chamber of Commerce in Vietnam (EuroCham Vietnam) and the Aquafina Vietnam International Week.

Vietnam likely to consider nuclear power development

The Economic Committee of the National Assembly (NA) has recently proposed developing nuclear power over the next decades to ensure national energy security and meet the ‘net zero’ goal Vietnam set at the 26th UN Conference on Climate Change (COP26).

Short animated Vietnamese film competes at Cannes Film Festival

“Giac Mo Goi Cuon”, known as “Spring Roll Dream” in English, a short animated film by a young Vietnamese director has been nominated in the La Cinef, a category at the Cannes Film Festival which honours works by students from global film schools.

PM welcomes Intel’s investment expansion in Vietnam

Prime Minister Pham Minh Chinh applauded Intel’s decision to expand its investment in Vietnam while receiving its CEO Patrick Gelsinger in Hanoi on May 27.

Hanoi to build 17 bridges spanning Red River

In addition to the seven existing bridges, Hanoi will have 10 more bridge crossing the Red River, under a development plan to 2030 with a vision towards 2050.

Localities asked to report progress of large FDI projects

The Ministry of Planning and Investment has requested localities to report the execution of large foreign direct investment (FDI) projects that need significant investment and use large land lots.