MOIT works to boost auto industry localization in 2017

Speaking at a recent business forum in Hanoi, Minister Tran Tuan Anh of the MOIT expounded upon the opportunities for growth in the segment within the context of the larger AEC marketplace.

Currently, the auto segment in Vietnam is comprised of some 400 manufacturers, principally smallholders, employing roughly 100,000 workers, said Minister Anh, noting he would like to see those figures substantially expanded.

Per MOIT statistics, the country’s total production capacity for passenger vehicles is currently about 460,000 units per year, which are produced about equally by the foreign and domestic sectors.

Since 2010, the country has principally been involved in the assembly of trucks and passenger busses with ten seats or more, noted Minister Anh.

The direstion he would like to see the industry focus on in 2017 is developing the small sedan segment with nine-seats or less, which are not only suitable for Vietnamese families and their budgets, but also matches the world trend towards smaller cars that consume less energy and are more environmentally friendly.

While the domestic sector has been able to produce some simple parts – such as mirrors, glass, seats, electric wires, batteries, tubes and some plastic products – few companies have invested in advanced production technologies such as those used in the manufacture of auto bodies.

In terms of sales prices in the retail market, auto prices in Vietnam remain relatively high when compared to other Asian countries.

To purchase a passenger vehicle in Vietnam, customers must pay three types of taxes and five different fees.

This leads to higher prices for autos produced in Vietnam, according to Michael Sieburg, associate partner at Solidiance, an Asia-focused management consulting firm headquartered in Ho Chi Minh City.

However, with many bilateral and free trade agreements coming into force over the next couple of years, import taxes on auto vehicles and parts should greatly reduce, translating into opportunities for more price competitiveness in the market.

Passenger vehicles with small engines should benefit the most from these lower tariffs and hence lower costs and the market should see strong retails sales growth from the synergy of lower sales prices combined with higher purchasing power of citizens as the country’s middle income population rises.

It is expected that there will be a new investment wave from global automakers setting up facilities in Vietnam with an eye on the regional market, fuelled by the government’s policies aimed at encouraging and enticing investment.