Assembled-in-Vietnam cars are twice as expensive as Thailand’s
Car prices in Vietnam are nearly two times higher than in other countries in the region such as Thailand and Indonesia, and much higher than in countries with developed automobile industries such as the US and Japan.
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In the latest report about the auto industry development, the Ministry of Industry and Trade (MOIT) said the industry contributes billions of dollars to the state budget and helps reduce the trade deficit, while it creates 120,000 direct jobs.
By 2016, Vietnam had 173 automobile manufacturers and assemblers, of which 56 enterprises make cars from separate parts and 117 make products from base vehicles. Most of them have small scale operation.
MOIT admitted that the automobile industry still cannot meet the requirements of a real automobile production industry as most of them do simple assembling.
Their production lines mostly undertake four works - welding, painting, assembly and inspection.
MOIT also pointed out that the car prices in Vietnam are still higher than in other regional countries. They are nearly two times higher than in Thailand and Indonesia, and much higher than the US and Japan.
This is attributed to high taxes and fees, and to the low domestic cumulative yield (enterprises’ output is far lower than the designed capacity). The quality of domestically assembled cars is still lower than imports despite the considerable improvement recently.
MOIT has admitted the failure in the attempts to increase the localization ratio in less-than-9-seat cars. Vietnam hoped to see the localization ratio of 40% by 2005 and 60% by 2010. However, at present, the figure is just 7-10%.
Thaco, a Vietnamese owned enterprise announced the localization ratio of 15-18%, while Toyota Vietnam, a joint venture with Japan, reported the localization ratio of 37% for Innova model.
It is estimated that enterprises have to import US$2-3.5 billion worth of components to serve domestic assembling.
“The locally made content level in the products made in other regional countries is higher than Vietnam, at 65-70%, while it is 80% in Thailand. So, if domestic manufacturers don’t have effective solutions to increase the localization ratio, they won’t be able to compete with foreign products in the context of AFTA,” the MOIT report said.
However, though many experts have advised to give up the dream of developing the automobile industry, MOIT persists in developing the industry.
The ministry has set up an inter-ministerial taskforce to give comprehensive assessment of the Vietnamese automobile market. The taskforce has had working sessions with enterprises on the production plans of every enterprise in the 2018-2020 period.
MOIT is considering applying safeguard measures when necessary (imports increase too sharply) to protect local production.
