VietNamNet Bridge – Viet Nam's automobile industry had failed to reach its objective of selling cars at prices to suit Vietnamese pockets.

Workers assemble a five-seat car at the Ford Viet Nam Company's factory in Cam Giang District in the northern province of Hai Duong. According to the Ministry of Industry and Trade, Viet Nam's automobile industry has failed to sell cars at prices to suit the budgets of domestic consumers.

The remark was made by the Director of the Industry and Trade Ministry's Heavy Industry Department, Nguyen Manh Quan.

Prices were still high compared with those in other regional countries, Quan said at an online seminar held by Cong Thuong (Industry and Trade) newspaper on Thursday.

"The cost of cars in Viet Nam is about 20 per cent higher than in other ASEAN countries because domestic output is low and most assembly lines are operating at about 50 per cent of capacity," said Quan.

Viet Nam's automobile industry involves Toyota, Ford, Nissan and Mercedes.

There are 18 FDI and 38 domestic businesses making and assembling cars. They have a capacity of about 460,000 vehicles a year.

The sector pays more than US$1 billion in taxes annually and creates job for about 80,000 people.

At the seminar, experts said the industry was so sluggish because of the low rate of making parts locally, taxes and fees.

Quan said the localisation rate had risen from 7 to 10 per cent for small car and 35-40 per cent for light-duty trucks, but this was still very low compared with the target.

To buy a car, Vietnamese have to pay eight types of taxes and fees, including import tax, special consumption tax, VAT, vehicle owner registration fee, car registration fee, car number granting fee and road transport fee.

Experts are worried that by 2018, when Viet Nam completely joins in the ASEAN Free Trade Area, the tax on imported cars will be zero.

This means that if the Government does not change its policies, the domestic industry will fail to compete with others in the region.

CEO of Ford Viet Nam and chairman of the Viet Nam Automobile Manufacturers Association Jesus Arias said his members wanted a concrete itinerary for industry development from now until 2018 so that they could set up business plans.

Arias said stable policies helped enterprises to predict outcomes so that they could set up parts suppliers who could join in the global network.

To achieve this, the industry needed to produce a specific number of cars. To make a car, thousands of parts are needed. No car maker can produce all parts by themselves, said Arias.

To develop, a sizable market is needed and proper policies to attract investors.

Head of the Industrial Policy and Strategy Institute Duong Dinh Giam said the Government was determined to develop the car industry.

"Automobile development is an indispensable trend of every nation when average incomes reach $3,000 a year or more. Therefore, we need to take advantage of this trend," said Giam.

The average income of Vietnamese is estimated to hit $1,900 per head this year, according to a recent report from the General Department of Statistics.

Giam also said the Government had limited the sale of personal vehicles in the past because the traffic system was so inadequate.

However, the Viet Nam Transport Development Strategy approved in February plans to have about 3.2-3.5 million vehicles on the road by 2020, compared to nearly 1.65 million at present.

Source: VNS