In recent years, Vietnam’s automobile industry has experienced great changes thanks to stable growth of the country’s economy. However, the scale of the automobile industry is still small in comparison with other countries in the region. Will Vietnam’s becoming a member of the World Trade Organisation be any help to its automobile industry?
Dr Nguyen Xuan Chuan, former Minister of Industry and President of the Vietnam Association of Automobile Engineering talks about the future of Vietnam’s automobile industry development.
Reporter: What are challenges facing Vietnam’s automobile industry after the country joined the WTO?
Dr Nguyen Xuan Chuan: Opening up the market in line with WTO commitments will be the biggest challenge of the automobile industry as it will have to compete with many strong rivals, particularly Chinese automobile producers. Moreover, products from the Republic of Korea and India are becoming more competitive once they penetrate the Vietnamese domestic market. India, for example, is now producing small and cheap cars at a price of between US$2,300 and US$2,400.
The second challenge is Vietnam’s regulations and standards failing to meet international standards, causing difficulties in exploiting Vietnamese products overseas. I think that to boost exports, we will have to work hard to ensure international standards and regulations for automobile producers are met.
Reporter: Where does Vietnam’s automobile industry stand in the region and the world?
Dr Nguyen Xuan Chuan: Vietnam is now lacking many standards, including quality and industrial standards. Moreover, the present standards fail to meet requirements for export. For example, Vietnam’s standards for engines can only reach Euro 2 by July, while the world is applying standards Euro 3, Euro 4 and soon Euro 5. Therefore, the State should set standards for automobile producers to follow. If there are no strict regulations or high standards, automobile makers will choose cheap materials to produce low-quality products.
Reporter: Is there any advantage for the Vietnam automobile industry in future development out of the above disadvantages?
Dr Nguyen Xuan Chuan: It is true that the country has almost no advantages in developing the automobile industry. Ninety percent of production materials are imported and infrastructure facilities have not met demands for the development of a domestic automobile market. Therefore, what I think the advantage of the country’s automobile market is a potential market in the future. It is estimated that Vietnam’s population will reach 100 million by 2024 – a big figure for the automobile market. Many foreign partners are keen to make business deals in Vietnam for long-term development of a big and real automobile market.
Reporter: What about Vietnam’s cheap labour force, is it an advantage, do you think?
Dr Nguyen Xuan Chuan: Although we have a cheap labour force, it is not really an advantage. In fact, the price of labour per car accounts for only 5-6 percent while the price of labour in the electronics sector makes up to 30-40 percent.
Reporter: Currently, many people want to buy cars at cheap prices. How will this have an impact on Vietnam’s automobile industry and can the country meet the demands in future?
Dr Nguyen Xuan Chuan: Obviously, for those who begin producing cars, technical requirements and qualifications for production will be different. However, in my opinion, the most important prerequisite for developing the automobile industry is investing in infrastructure construction. In Vietnam, as infrastructure facilities do not allow for the use of a lot of cars, so low cost cars will become saturated quickly and automobile manufacturers will easily suffer losses. Automobile manufacturers should monitor the situation carefully.
Reporter: When opening up the market, the protection in the automobile industry become outdated. In your opinion, what policies should the country make to improve the competitive edge of the automobile industry?
Dr Nguyen Xuan Chuan: We can get involved in regulating the market with technical barriers. If the technical barriers are put up, the country will prevent the poor quality cars from flooding the local market. Besides, it takes great efforts to improve the quality of cars, which are produced in the local market. Secondly, we can learn from Singapore. Singapore’s road system is very good, the country limits the use of cars by buying the rights of using cars. Another important thing is to develop infrastructure to meet the demands for development in accordance with international standards. In Vietnam, many highways and signposts have not met international standards. When the infrastructure meets international standards, this will facilitate the development of the automobile market.
Reporter: What can you predict about Vietnam’s automobile market as well as the country’s automobile industry in future?
Dr Nguyen Xuan Chuan: I think that in ten years, Vietnam’s automobile industry will further develop. At that time, the country will be on par with Malaysia.
Reporter: Thank you very much.
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