Automotive industry expected to get stronger

Buyers take a look at an Xpander car at a Mitsubishi showroom - Photo: autopro.com.vn

"The Vietnamese automobile and motorbike industries have been very lively in the last two decades and there is still room for further development," Nghiem Van Hung, assistant manager at sales and marketing department, Inoac Vietnam Co Ltd, told Vietnam News.

A large number of products are now produced and assembled in the country and foreign automakers have moved their plants to Vietnam, he said.

Foreign companies have received preferential policies in terms of tax and administrative work, so the number of foreign companies in Vietnam has increased, Hung added.

Most foreign automakers come from Japan. Mitsubishi in 2018 inaugurated its first assembly plant in the southern province of Binh Duong, becoming the seventh Japanese automaker moving production to Vietnam.

Some Indonesian carmakers and part companies are considering moving their plants to Vietnam as well because they see potential in the Vietnamese market.

According to Indonesian Ambassador to Vietnam Ibnu Hadi, auto and auto parts are Indonesia’s two biggest exports to Vietnam in terms of volume.

In the first four months of 2019, Vietnam imported nearly 58,300 cars in total, worth 1.3 billion USD. Of the figure, Indonesian car exports accounted for more than 12,700 units, worth 190 million USD.

Last year, Indonesian companies exported 289 million USD worth of cars to Vietnam. The figure is expected to reach 600 million USD this year.

Sales volume of Mitsubishi Expander topped Indonesia’s car exports in the first four months, with more than 17,600 car units. Of the figure, more than 3,700 units were exported to Vietnam.

Therefore, Indonesian companies are looking to expand their influence in Vietnam by setting up offices and looking for local part suppliers.

According to Prihatanto Agung Lesmono, president director of Astra Visteon Indonesia, his company is looking for more tier-2 local suppliers with higher quality. Astra Visteon Indonesia has an office in Vietnam, known as Astra Visteon Vietnam Co Ltd.

However, a number of Vietnamese part suppliers do not meet quality standards so they need improvement to meet the localisation requirements, he said.

But the competition between local suppliers would get fiercer, Hung said, as foreign companies want higher quality and cheaper parts.

More Chinese companies have been present in Vietnam as they shift production from China to avoid US tariffs, according to Hung. Their products are of medium quality but the prices are much cheaper.