The automakers see great opportunities to export cars to ASEAN as the tariff will be cut to zero percent from 2018 under the ASEAN free trade agreement (FTA).
However, in order to be able to enjoy the zero percent tariff, Vietnam’s products must have the minimum localization ratio of 40%.
Truong Hai Automobile has kicked off a US$500 million project on manufacturing and assembling 100,000 Mazdas a year in Chu Lai Industrial Zone in Quang Nam province with technology transfer from Mazda. It is expected that in the first phase of the project, 50,000 cars a year, will be churned out.
Tran Ba Duong, president of Truong Hai, said the localization ratio of Truong Hai products would increase to 40% from 18% and would be exported to Laos, Myanmar, Cambodia and the Philippines.
Thanh Cong Group, in cooperation with Korean Hyundai Group, is moving ahead with its project on a new automobile factory in Ninh Binh province. The US$500 million project, with the designed capacity of 120,000 cars a year, is expected to be completed by mid-2019.
Le Ngoc Duc, CEO of Hyundai Thanh Cong, said the company will invest in a factory that makes components with technology transfer from the Republic of Korea’s Hyundai.
The locally made content ratio in Hyundai Thanh Cong’s products is 19%, while the figure is expected to increase to over 40% once the factory becomes operational, slated for 2019. This will allow Hyundai Thanh Cong’s car products to easily penetrate the SE Asian markets thanks to the preferential tariff of zero percent.
All the Hyundai vehicles to be manufactured at the new factory would be sold domestically or exported. This is a strategy of the Republic of Korea’s Hyundai: turning Vietnam into the Hyundai automobile manufacturing center in SE Asia.
Kia manufacturer is also planning the same. While the Kia factory in Malaysia specializes in assembling right-handed vehicles, the factory in Chu Lai will make left-handed cars for sale in Vietnam and some SE Asian countries.
According to Duc, automobile manufacturers will not focus on the domestic market only. All of them will they be able to increase output, minimize production cost and enhance competitiveness by focusing on both foreign and domestic markets.
Vietnamese manufacturers believe that their small-size, low-cost models can sell well in Myanmar and Cambodia.