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Vietnam’s Automakers Face Challenging Times with Future Trade Agreements

Vietnam’s automobile production was low in Southeast Asia, compared to 1.91 million cars in Thailand, 1.1 million in Indonesia, and 615,000 in Malaysia.

2 main causes of the slow development of Vietnam’s automobile industry:

  • Lack of Parts manufacturers
  • Transport infrastructure.

Vietnam has 17 auto assembling companies but it has only 33 supporting industrial companies of level 1 and 181 companies of level 2.

Thailand has a similar number of car assemblers and carmakers but it has up to 709 supporting firms of level 1 and more than 1,100 spare-part manufacturers of lower level local businesses.

The number of enterprises involved in the automotive production chain in Malaysia and Indonesia are also much larger than that in Vietnam, with about 280 suppliers of level 1 and 1, 200 suppliers of level two in Malaysia and in Indonesia, the figures are 166 and 336, respectively.

Currently, the localization rate of the domestic automobile manufacturers in Vietnam is very low, about 10-30% depending on car models, while the rate is up to 70-80% in Thailand.

Automobile prices in Vietnam are much higher than those in its neighboring countries due to higher taxes which reflects a 60-80% increase in price. Average income is only $2,200 per person in 2015.

It is anticipated that local automakers will face great challenges when trade agreements will bring the import tax rate on cars to zero percent in the very near future.

Specifically, import duties on cars from the ASEAN region will be reduced to 0% in 2018, and the rate on cars imported from WTO countries will fall from 70% to 47% in 2019.

Thailand outreached South Korea, China and India to become the largest car exporter to Vietnam. Thailand exports increased to 15,117 vehicles, with turnover of $276.5 million the first half of 2016.

The Vietnam Automobile Manufacturer Association (VAMA) forecast that this year Vietnam will produce 260,000 vehicles, up 10% compared to 2015.

However, the sales of trucks will slow down in 2016. The motivation for truck sales in 2016 will come from the demand of replacing outdated vehicles. According to the Vietnam Register Agency, 19,000 trucks will be out of date in 2016, compared to 15,000 vehicles in 2015. Article Published on VietnamNet

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