Auto industry needs to rev up for ASEAN competition

10:06 | 03/12/2017 Industry

(VEN) - The Vietnamese automobile industry will face more difficulties when the tariffs on cars imported from ASEAN countries are zeroed out on January 1, 2018. According to experts, domestic auto manufacturers must develop automobile clusters and support industry zones to reduce costs and improve competitiveness.

auto industry needs to rev up for asean competition

Nguyen Thi Tue Anh, deputy director of the Central Institute for Economic Management (CIEM), said Vietnam had formulated a policy for the development of the automobile industry, but the domestic automobile industry remains underdeveloped. He attributed the problems to the small local market size and low purchasing power, in addition to the lack of appropriate mechanisms and policies to encourage the industry’s development.

To overcome these obstacles, the government has asked ministries and departments to seek measures to promote the development of the automobile industry, gradually turning it into an important economic sector.

The Ministry of Industry and Trade is building a policy to support the development of the automobile industry, which aims to reduce costs for businesses and improve production efficiency and competitiveness.

Nguyen Thi Xuan Thuy from the Institute for Industrial Policy and Strategy under the Ministry of Industry and Trade said that Vietnam has not yet planned automobile clusters, an approach that needs to be considered for a long-term development vision. According to Nguyen Thi Xuan Thuy, there must be a leader to attract satellite businesses in order to create an automobile cluster, thereby attracting more research institutions and promoting infrastructure investment. The development of the Japanese automobile industry follows this model.

Nguyen Thi Xuan Thuy stressed that Vietnam has a potential automobile market due to its large population and high GDP growth. However, in addition to competition from zero-tax ASEAN car imports, domestically assembled vehicles are subject to import duties on components. They also have low local content, which may lead to higher prices than those of imported cars from countries in the region.

Pham Anh Tuan, head of the Policy Subcommittee under the Vietnam Automobile Manufacturers’ Association (VAMA), said increasing local content in the production of automobile parts is an important and long-term goal of Vietnam’s automobile industry.

“With the current situation in Vietnam as well as practical experience in developing the automobile industry of countries around the world, an increase in market size will lead to higher local content. However, it takes a long time to develop support industries,” Pham Anh Tuan said.

Vietnam has about three million cars and 50 million motorcycles. Only two-three percent of the population buy new cars.

Lan Anh