Imported cars will undercut Vietnam products after tariff removal: industry

Locally-assembled cars could cost 20% more than those imported from neighboring countries such as Thailand and Indonesia by 2018, when tariffs for ASEAN cars will be cut to zero from the current 50%, industry insiders say.

According to a report released by the trade ministry at a recent business forum, one of the biggest problems hindering the growth of the automobile industry is the lack of parts suppliers.

Vietnam currently has more than 400 small- and medium-sized companies that are either auto assemblers or parts suppliers. Noticeably, nearly half of them are foreign-invested and few have invested in advanced technologies to produce more than basic components such as mirrors, electric wires, batteries and some plastic parts.

The trade ministry said local parts suppliers can only fulfill between 7 and 10% of manufacturing orders for nine-seat cars.

As a result, assemblers have to import certain parts of a car, which increases prices, industry insiders told the business forum. They forecast that in 2018 locally-assembled cars could be more expensive than those imported from ASEAN countries, which would benefit from the coming tariff removal.

Experts also pointed to the fact that Vietnam’s automobile industry with more than 400 businesses is not working at its full capacity, which is about 500,000 units per year.

Last year it imported a record 244,914 cars. Some estimates showed that total car sales in Vietnam this year, of both local and imported ones, could increase about 22% to 300,000 units.

The Vietnam Business Forum suggested the government offer incentives for auto parts suppliers and consider scrapping import tariffs on parts that are not available at home.