Automotive industry still driven mostly by foreign content

10:46 | 01/11/2018 Industry

(VEN) - Vietnam was aiming to achieve 40-percent local content for fewer-than-nine-seat cars by 2005 and 60 percent by 2010. However, the local content of new autos has reached only between seven and 10 percent on average.

automotive industry still driven mostly by foreign content

Narrow market

Vietnam has a total production capacity of about 460,000 units per year, including fewer-than-nine-seat cars (200,000 vehicles per year), and vans and passenger cars (215,000 vehicles per year). Vehicle prices in Vietnam are higher than in other regional countries. The average locally made content rate is just seven percent to 10 percent. The highest local content, 37 percent, is for Toyota Vietnam.

According to the Ministry of Industry and Trade’s Industry Department, the Vietnamese automotive industry is too small, in fact the smallest in the ASEAN bloc. With anticipated per capita income reaching US$3,000 by 2020, Vietnam is expected to enter the stage of motorization in the 2020-2025 period, with total demand reaching 600,000 units per year by 2025. If the domestic automotive industry meets market demand, Vietnam will save US$3-7 billion in import turnover in 2025 and US$5-12 billion in 2030.

Vietnam currently enjoys a trade surplus in the auto parts industry, but domestic firms play no role in this success because the market is dominated by export-oriented foreign invested enterprises.

Increasing local content

Domestic auto manufacturers should devise effective solutions to increase the local content to more than 40 percent to enjoy the ASEAN Free Trade Area’s tax incentives in order to improve their product competitiveness.

Toyota Vietnam General Director Toru Kinoshita said Toyota consistently strives to increase local content in its products and achieves a high rate of local content. For example, Vios, a strategic model of Toyota Motor Vietnam (TMV), has used treble parts from 51 to 151 items. At present, 33 suppliers provide over 400 products for Toyota, including five Vietnamese vendors.

Thaco is also focusing on investment in building and upgrading auto manufacturing and assembly plants, including trucks, buses, cars, specialized vehicles, and agricultural machinery.

To increase local content, VinFast is promoting investment in a plant to produce the body for its models and plans to localize almost all the pressing and welding of the body parts.

Promoting support industries is seen as an urgent requirement for the development of the automotive industry.

Lan Anh