Vietnamese auto industry seeks growth solutions

15:07 | 28/02/2014 Entertainment

(VEN) - According to the Vietnam Automobile Manufacturers’ Association (VAMA), total sales of the domestic auto industry in 2013 reached 110,519 vehicles, a rise of 19 percent compared with 2012 (92,584 vehicles). However, the growth is yet to meet the desire of investors as well as the government.

At a recent meeting with representatives from Vietnamese ministries and sectors at the headquarters of the Ministry of Planning and Investment, Chairman of the Automotive Group at the Vietnam Business Forum (VBF), Gaurav Gupta, said that Vietnam currently had over 20 auto manufacturers with 40 different brands, but the growth of the Vietnamese auto industry remained low.

In 2013, the total production output of the Vietnamese auto sector reached 100,000 units. If auto manufacturers operated at their full capacity, the output should have reached 500,000 units. This means domestic auto manufacturers have brought into play just 20 percent of their capacity. “This makes investors worried about the development of the Vietnamese auto industry and hesitant about future investment plans,” said Gaurav Gupta.

Gaurav Gupta attributed the slow growth of the Vietnamese auto sector in recent years to the inconsistence of government policies and in his opinion, this has affected domestic assemblers and manufacturers of both completely knocked down (CKD) and completely built-up (CBU) vehicles. Inadequate infrastructure has been another reason hindering the growth of the Vietnamese auto industry.

To develop the domestic auto industry, the Automotive Group recommended that the Vietnamese government should have clear, consistent policies to attract investor attention into this sector and build consumer trust.

VAMA recommended that the government should reduce the excise and value added taxes to make cars affordable to Vietnamese people. In addition, the government should apply financial support policies to make it easier for consumers to borrow money to buy cars. Thailand, for example, applies a policy that allows consumers to be financially assisted to buy the first car. This policy has helped Thailand boost the development of the domestic auto market and strengthen investor trust in it. At the same time, it is necessary to increase investment in upgrading the infrastructure, roads, car-parks, transport works, and restrict the promulgation of inconsistent policies that have an adverse impact on the development of the entire auto sector.

To create favorable conditions for domestic auto assemblers and manufacturers to improve their competitiveness, the government must apply appropriate preferential policies that can reduce the gap between imported and domestically assembled/manufactured vehicles; apply the same excise tax rate to CBU and CKD auto businesses; offer corporate income tax incentives to CKD auto businesses; strictly control the import of autos and trade in used cars. The government must also have policies that encourage investment in support industries for the auto sector.

The Ministry of Finance is drafting some supplements to the excise tax policy. These supplements are expected to be approved by the National Assembly in October 2014. Excise income tax-related recommendations of the Automotive Group will also be considered.

Vu Ngoc Dung from the Transportation Department of the Ministry of Transport said that Vietnam had made an overland transport development plan towards 2020 with an orientation to 2030. Under the plan, action will be taken to improve the overland transport infrastructure.

Do Nhat Hoang, Director of the Foreign Investment Agency under the Ministry of Planning and Investment, said that the Vietnamese government had taken great attention to developing support industries and was intensifying the attraction of investment in this field. Support industries will help resolve many problems which are facing the Vietnamese industrial sector and the domestic auto industry in particular./.

Viet Nga & Quynh Nga