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VIETNAM AUTOMOBILE INDUSTRY: DIFFICULT BUT PROMISING
Compared to other industries, Vietnam's automobile industry has not really contributed to the economy in general and industry in particular. However, with the rise of some new businesses, the automobile manufacturing industry still has a chance to grow.
Many barriers
According to the report of the Ministry of Industry and Trade, the total number of automobile-related manufacturing enterprises in Vietnam is currently 358 enterprises. Among them, there are 50 automobile assembling enterprises, 45 enterprises producing chassis, body and 104 enterprises manufacturing trunks, 214 enterprises producing automotive parts (quite low compared to 385 enterprises in Malaysia and 2,500 businesses in Thailand).
Industrial products supporting the automobile industry have become more and more diversified, meeting part of the demand for domestic car assembling and manufacturing enterprises. For trucks, passenger cars with 10 seats or more, domestically produced special vehicles have achieved a relatively high localization rate and met basic demands such as 7-ton trucks meeting about 70% of demand with an average localization rate of 55%; passenger cars from 10 seats or more, some specialized vehicles meeting about 90% of demand, with localization rates from 45% to 55%.
However, the industry of supporting automobile production of Vietnam is still limited. No factory has invested in manufacturing important parts of cars such as engines, gearboxes, motion systems; The quality of automotive parts and accessories in the market is still poor, failing to meet the requirements; Products are not diversified, have weak competitiveness and cannot dominate the domestic market. Product cost is still high; competitiveness is weak.
Regarding the supporting automobile manufacturing industry of FDI enterprises and domestic enterprises, for trucks, passenger cars with 10 seats or more, domestically manufactured special vehicles have achieved high localization rates, basically meeting 70% of domestic demand for trucks, 55% of demand for passenger cars from 10 seats or more, while some specialized vehicles meet about 90% of demand. Some spare parts have been exported to Laos, Cambodia, Myanmar and Central America.
Many supporting automobile production enterprises in our country have increased the ability to link and cooperate to specialize in producing spare parts with large volumes, ensuring the quality requirements of assemblers, proceeding to perfect production models.
The automotive industry in Vietnam lacks the entry of global companies into the market, as well as the participation of export processing enterprises (EPEs). The majority of global auto parts suppliers do not enter the market because Vietnam's domestic demand is still too small; Global suppliers cannot invest without ensuring that automobile assembling and manufacturing enterprises (OEMs) will maintain or enhance production capacity in Vietnam (large tier 1 suppliers).
On the "supply" side, the capacity of domestic automotive parts suppliers is still very limited, there is lack of domestic suppliers which can meet the quality standards required to participate in the global supply chain. The database system of information on domestic automotive parts suppliers has not been updated regularly and fully, or not yet available to meet the information needs of enterprises.
In terms of mechanism, the automobile industry lacks appropriate measures and policies of the Government to support the development of supporting automobile production industries: Enterprises cannot be proactive due to complex mechanisms and procedures; licenses for production, domestic supply and for export are different (big EPE).
Expect a new element
Truong Hai Automobile Joint Stock Company (Thaco), Hyundai Thanh Cong and VinFast are 3 names that bring positive signals to the domestic automobile industry. Each enterprise has different strategies but focuses on investment, increasing production capacity and competitiveness for products manufactured in Vietnam. All three businesses do not hide their ambition to reach the region and become a country that can export cars.
VinFast has successfully introduced 2 new models, the way that VinFast has chosen is buying any technologies that they cannot research and develop by themselves, instead of wasting time on creating a product not meeting market demand, or even a superior product. VinFast motorbike and automobile production complex goes into production only one year after construction starts.
Thaco is one enterprise investing early and methodically in the automobile industry. Through many stages, this enterprise continues to invest more strongly, build new and expand automobile factories, accessory manufacturing, Research and Development Center.
In 2018, with an investment capital of VND 2,000 billion, Thaco inaugurated a factory manufacturing and assembling large bus and mini buses with a capacity of about 20,000 cars / year. In March 2018, Thaco inaugurated the most modern Mazda automobile factory in Southeast Asia with a total investment of VND 12,000 billion, a total capacity of 100,000 cars / year. In addition, Thaco has signed a technology transfer and product distribution contract with many large corporations in the world to continue being the most powerful enterprise in producing and distributing brands in Vietnam market.
Hyundai Thanh Cong signed a cooperation agreement to become a strategic partner of Hyundai Group in a joint venture to produce passenger cars and commercial vehicles in 2017 and quickly promoted activities to expand production and assembly of Hyundai vehicles with the largest scale in the area. The second factory of Hyundai Thanh Cong has been constructed since the middle of 2018 and is expected to open in 2019.
The booming appearance of VinFast and the success of Thaco and Hyundai Thanh Cong in investment and production expansion are good signs for the Vietnamese automobile industry, although they still face fierce competition with import tax in the region at 0%.
Source: VCCI
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