Vietnam to develop support industries with VinFast
Increasing the localization ratio in industrial products and becoming more involved in the global production and supply chain are the top concerns of Vietnamese enterprises.
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Dau Thau cited a JETRO (Japan External Trade Organization) report as showing that the locally made content rate in industrial products in Vietnam was 34.2% in 2016, far lower than China’s 67.8%, Thailand’s 57.1% and Indonesia’s 40.5%.
Jun Yanagi, Japan’s deputy ambassador to Vietnam, said there are 1,600 Japanese companies operating in Vietnam, half of which are in the manufacturing sector. However, the proportion of industrial products the companies order from Vietnamese enterprises is very low.
The number of business transactions between Vietnamese and Japanese companies is still limited.
Earlier this year, Takimoto Koji, chief representative of JETRO HCM City, warned that some Japanese automobile manufacturers were considering leaving Vietnam. One of the reasons was Vietnam’s weak supporting industries.
The Ministry of Industry and Trade (MOIT) admitted the underdevelopment of the domestic supporting industry. Local newspapers cited a report from the ministry as showing that Vietnam was aiming to obtain a 40% localization ratio for fewer-than-9-seat cars by 2005 and 60% by 2010.
However, the average locally made content rate is just 7-10% now. The highest localization ratio, 37%, is for Toyota Vietnam’s Innova.
Vingroup has announced a plan to develop VinFast, a Vietnamese automobile brand. The manufacturer stated that by 2025, the localization ratio would be 60%.
Vingroup, an investor, is a powerful conglomerate owned by Pham Nhat Vuong, the first Vietnamese dollar billionaire recognized by Forbes. Vuong has had investments in many fields, from real estate and retail to education and healthcare.
Vingroup has appointed Vo Quang Hue, who was CEO of Bosch Vietnam as deputy general director, to be in charge of the VinFast project.
The decision by Vingroup to choose Hue, who was trained in automobile technology in Germany and worked for BMW and Bosch, in analysts’ eyes, shows the determination of the conglomerate to increase the localization ratio of auto products.
Nguyen Tuan, director of Thien An Phuc, commented that VinFast chose Hue as he is the right person to implement the localization plan because of his extensive knowledge.
According to Phan Dang Tuat, an expert, the 60% localization ratio would be a big challenge. A sedan has 24,000 car parts. If one enterprise provides six parts, VinFast would need 4,000 enterprises that provide car parts.
