A Japanese expert, who attended a workshop on automobile industry development recently, said that there are two ways to develop an automobile industry. In the first way, stemming from the thought that the transport infrastructure remains poor, the country should limit the number of cars rolling on streets now, and would only encourage the use of cars when the infrastructure can be improved. In the second way, Vietnam would develop the automobile industry, which would force the infrastructure to develop accordingly.

If Vietnam follows the former way, it will gain nothing, no beautiful road and no automobile industry. Meanwhile, if it follows the latter way, it will get both the good transport system and the automobile industry.

In fact, the Government of Vietnam has been trying to limit individual vehicles when imposing high luxury tax on cars. The policy has resulted in the fact that Vietnam has 60,000 additional cars a year, and the local automobile industry does not have the chance to develop.

Does Vietnam need an auto industry?

The answer is yes. The automobile industry development strategy for 2010-2020 approved by the Government clearly states that the automobile industry plays an important role in the modernization and industrialization of the country.

A developed automobile industry would help stimulate the development of other industries including electronics, metallurgy, chemistry, and others. The developed automobile industry would help create several millions jobs. It is estimated that the 500,000 car/year market would generate 1mil jobs. It will also help balance the trade with foreign partners. The Japanese National Policy Institute has estimated that Vietnam would have to spend $3bil a year by 2020 if does not have automobile industry.

What has Vietnam been doing to have an auto industry?

According to the Ministry of Industry and Trade, Vietnam’s automobile industry began developing in 1991, when two automobile joint ventures, Mekong and VMC, became operational. After 15 years of development, Vietnam now has 160 manufacturers and assemblers.

Domestic owned manufacturers are all small ones, and most of them, except Xuan Kien and Truong Hai, have the total assets worth less than VND20bil for each.

As for foreign invested companies, except Hino, which specializes in making heavy trucks, all others can make all kinds of products.

To date, all the enterprises make cars simply by assembling the car parts imported from parent companies. The highest localization ratio of cars is 25% (Toyota/Vios), and the lowest ratio is 2%.

Experts said that three factors are needed to form an automobile industry, including market, staff and technique. Vietnam has two of the three, market and staff. The domestic market is considered to have a high potential with the consumption level expected at 1mil units a year. Vietnamese staffs are believed to be industrious and skillful. However, Vietnam lacks the third factor, technique.

In the last 15 years, very few foreign investors make investment in making car parts and transfer technologies to Vietnam.

In 2004, Ford tried to find a place in Vietnam for its base of making car engine for South East Asia. However, it finally decided to set up the base in the Philippines. The group has recently injected $500mil in making small-size cars in Thailand, not Vietnam. The group only has one small assembling line in Vietnam which allows them to churn out 10,000 units a year.

Ford does not choose Vietnam, because it cannot find necessary factors here. The domestic market is still described as having great potential, since the Government imposes high luxury tax in order to limit consumption. Meanwhile, the policy on encouraging supporting industries was only enacted in August 2007.

Will Vietnam have an auto industry?

It took the Europe 100 years, Japan 50 years, and South Korea 30 years to develop automobile industries. Vietnam has experienced 15 years of development, when it has been trying to develop an automobile industry by protecting local production.

However, Vietnam does not have much more time to protect local industry, because it has to cut import taxes on cars by 2018 to pave the way for imports to enter Vietnam. Will Vietnam be able to build an automobile industry in 10 years?

Vietnam is striving to raise the localization ratio of car products, and in order to reach that end, it needs to develop supporting industries. Vietnam has to have several thousands enterprises that provide cars parts to assemblers instead of the current 100 enterprises.

A question has been raised about whether making vans and buses can be called an automobile industry. Vietnamese policy makers think that Vietnam should focus on making vans, buses and specialized vehicles, the products that do not require high technologies and prove to be suitable to Vietnamese enterprises. However, it is clear that the country will have a developed automobile industry if it can make sedans which require modern technologies.

Experts all gave pessimistic answers when asked if Vietnam would have an automobile industry, except the officials from the Ministry of Industry and Trade.

What about transport infrastructure?

Nguyen Minh Dong, an automobile expert, who once worked for the German company Volkswagen, said that Vietnam has the total population of 80mil, the total space area of 330,000 sq km of mainland, and a national economy which is growing rapidly. Meanwhile, it has 1mil cars of different kinds only. Why limit the number of circulating cars?

He said that the limitation in the use of cars has led to the bad design of roads. All the newly built roads in big cities of Vietnam do not have parking areas, because the designers think that there is no need to have parking areas when the number of cars is so limited. And since there are not many parking areas, and the roads become overloaded, state management authorities have all the more reason try to limit the number of cars.

The vicious circle is believed to lead to a unhappy end: no good transport infrastructure will be built, and no developed automobile industry can take shape.


Source: VietnamNet.