Emission policy frustrates automakers

Domestically made vehicles, fuel unable to meet emission standards

Decision 49/2011/QD-TTg, providing the roadmap for application of Euro 4 emission standards, was issued in 2011 and will come into effect from 2017.

However, in December 9, 2016, Notice 398/TB-VPCP of the Government Office indicated that Euro 4 standards will be applied to coaches and diesel buses from January 1, 2018. The standards will be extended to diesel trucks from 2022.

The implementation of Euro 4 standards was delayed because the fuel supply in Vietnam does not meet the requirements.  

According to Vietnam National Petroleum Group (Petrolimex), Dung Quat refinery produces 2.48 million tonnes of gasoline and 2.33 million tonnes of diesel oil each year, which account for 30% of the total domestic fuel production. 

However, these products have not met Vietnam’s QCVN 1:2015/BKHCN standard, which is equivalent to the Euro 4 standards. It is estimated that by 2021-2022, after finishing it sexpansion and upgrade, Dung Quat refinery’s fuel products could satisfy Euro 4 standards.

Similarly, the products of Nghi Son refinery and petrochemical complex, which will be put into commercial operation in 2017, do not meet this standard either.

On the basis of Notice 398/TB-VPCP, Vietnamese automakers have signed contracts to import components, spare parts, and other materials that are not available in Vietnam. These imports include Euro 2 automobile engines.  

Nevertheless, since January 1, 2017, Vietnam Register (VR) has stopped granting certificates for imported diesel automobiles. Many manufacturers have run into troubles when they found themselves unable to deliver vehicles they had previously signed for with customers.

Consequently, this decision has damaged auto firms in Vietnam, and created inequality between auto manufacturing companies and auto importers.

On March 10, 2017, in Notice 126/TB-VPCP, Prime Minister Nguyen Xuan Phuc concluded that the deadline for the application of Euro 4 standards would remain the same both for newly-assembled and imported automobiles and motorcycles, as specified in Decision 49/2011/QD-TTg. 

The standard would then be applied to diesel automobiles from December 31, 2107 and the MoT was assigned to propose the implementation plan before March 15, 2017.

Troubles on the horizon

On March 14, 2017, the MoT surprisingly summited the proposal on the application of Euro 4 standards from as early as March 31, 2017. Immediately, the proposal raised wide-scale protest from domestic automobile companies.

Mai Phuoc Nghe, deputy general director of Truong Hai Auto Corporation, said that the firm has 7,000 trucks that had been previously ordered and cannot be delivered because they are not certified by VR. He added that customers are growing increasingly irritated.

Thanh Cong Group Joint Stock Company, in charge of manufacturing, assembling, and importing automobiles, is in the same situation. 

Le Ngoc Duc, general director of Thanh Cong, said that his firm manufactured H100 trucks with Euro 2 diesel engines, which will be sold in the form of chassis, and it was allowed to be certified by the VR.

Based on the certificate on chassis and designs that the VR ratified in January and February 2017, the firm applied for a stock issue note to deliver 62 vehicles on order. However, since March 6, 2017, the VR has stopped providing stock issue notes for Euro 2 automobiles. 

Thanh Cong argues that it had finished its products and applied for the stock issue note in November 2016 when Decision 49/2011/QD-TTg was not in effect.

“At present, we have 366 chassis of H100 truck waiting to be packed and delivered. It is a waste and the reputation of our business will be damaged,” Duc said.

Besides, VR cannot speed up the assessment and trial run of Euro 4 engines because there is only one motor vehicle testing centre in Vietnam.

Notably, the MoT also stated that up till now, Euro 4 fuels have not been available on the market, so they proposed the MoIT to ask petroleum importers to supply Euro 4 diesel oil to meet market demand.

A petroleum expert said that even if the MoIT and petroleum importers wanted to import Euro 4 diesel, they would still need three to four months to prepare compatible infrastructure. 

In addition, importing diesel will lead to a surplus of 6.5 million tonnes of diesel from the Dung Quat and Nghi Son refineries, which do not meet the QCVN 1:2015/BKHCN standards, which may force the two plants to stop production.

The changing opinion of authorities demonstrates the instability and inconsistency in building a stable business environment for firms to invest in the automotive industry. 

In case this proposal passes, firms in oil refining and the automotive industry would be awash in trouble, which would promote imports and result in a trade deficit for Vietnam.