Auto support industry hits bumps on the road to self-sufficiency

09:06 | 08/12/2018 Car & Motor

(VEN) - The Vietnamese auto industry has developed rapidly in the past two years, with total designed capacity of about 500,000 vehicles per year, but it is hampered by the financial constraints facing local support industry manufacturers.

auto support industry hits bumps on the road to self sufficiency

Key to development

Pham Tuan Anh, deputy director of the Ministry of Industry and Trade’s Industry Department, said support industries play a key role in the development of the Vietnamese auto industry. Over the years, support industries have recorded important achievements.

Vietnam has 358 automobile-related manufacturing enterprises, including 50 auto assembly businesses, 45 car chassis and body manufacturers and 214 auto part producers. Trucks of up to seven tonnes have achieved a local content of 55 percent, while passenger vehicles with 24 seats and above have reached a local component rate of 45-55 percent. Some types of auto support products are exported to Laos, Cambodia, Myanmar and Central America.

Do Huu Hao, chairman of the Vietnamese Society of Automotive Engineers, said the Vietnamese auto industry has contributed dozens of billions of US dollars per year to the state budget and created jobs for millions of workers. In addition, businesses annually import spare parts and components worth of US$2-3.5 billion for domestic automobile manufacturing and assembling.

Higher costs compared to ASEAN

According to Deputy General Director of Toyota Motor Vietnam Shinjiro Kajikawa, Vietnam’s auto development depends much on the growth of its support industry. Small auto output and low local content increase car production costs. The cost to produce cars in Vietnam is 10-20 percent higher than that of imported automobiles from ASEAN countries, he said.

Nguyen Thi Thanh Hang, deputy director of the Tax Policy Department under the Ministry of Finance, said the government has promulgated tax incentives to create favorable conditions for domestic automobile manufacturing and assembling companies.

However, small spare part manufacturers complain of trouble accessing capital, while preferential policies and support mechanisms have only been offered for short terms.

According to an industry development strategy, Vietnam is driving toward a target of 227,500 domestically produced vehicles by 2020, 466,400 vehicles by 2025 and more than 1.53 million vehicles by 2035. At these rates, the domestically produced vehicles will meet about 67 percent of the domestic demand by 2020, 70 percent by 2025 and 78 percent by 2035.

By 2020, Vietnam is planning to be able to manufacture major components such as engines and gearboxes of trucks and passenger cars, to participate in global value chains, and become an important supplier of spare parts and components for the auto industry in the region and the world by 2035.

The Vietnamese auto industry strives to reach a production value of spare parts and components of US$5 billion by

2025 and US$10 billion by 2035.

Quynh Nga