VietNamNet Bridge – The Ministry of Industry and Trade has yet to issue guidance for an automobile industry development strategy though the Government approved this strategy in July last year.

A Mazda model distributed by Thaco

Vietnam will have to lower the duties currently applied on completely built-up (CBU) auto imports to 0% in 2018 in line with the ASEAN Trade in Goods Agreement (ATIGA). Meanwhile, Toyota Motors Vietnam has implied ending its local auto assembly and shifting to auto imports.

That might be the reason the ministry held a seminar early last week to find ways to rescue the long-backed auto industry.

Despite a slew of policy incentives the ratios of local content in automobiles assembled in the country have remained low.

Tran Anh Tuan, deputy head of the ministry’s Heavy Industry Department, said the nation’s total assembly and production output is around 460,000 units a year, half of them cars and the remainder trucks and buses. Local enterprises mostly do simple assembly work.

Truong Hai Auto Co. (Thaco) puts its localization ratio at 15-18% and Toyota Vietnam at 37% for the seven-seat Innova. For light trucks, Thaco reaches 33% and Vinaxuki 50%.

Thaco chairman Tran Ba Duong told the seminar that only auto assembly had been successful. His firm’s research has also found only assemblers could survive the free trade agreements in 2016 and 2017 and ATIGA after 2018.

Assembly should account for up to 90% of output if success is secured, he noted. Therefore, Thaco now holds a 40% truck market share, a 60% bus market share, and a 30% market share for cars of less than nine seats.

Therefore, automakers will feel their hands tied if there is no clear policy guidance, Duong said.

The strategy for the automobile industry development until 2025 with a vision toward 2035 came out in the middle of last year but auto enterprises have not made a move given the lack of guidelines, Duong said.

The ministry has remained cautious over the issuance of guidelines for the sector.

Deputy Minister of Industry and Trade Tran Tuan Anh said the ministry has learned profound lessons from the auto industry, so it has to consider the matter carefully.

The ministry has consulted relevant agencies and the issue needs more time, he stressed.

Nonetheless, many in the industry have bemoaned the delay.

Ho Van Tuan, deputy general director of Honda Vietnam, said the carmaker needs five years to break even and 10 years to earn profit. No one can wait 15 to 20 years to benefit from a policy.

Bui Ngoc Huyen, chairman and general director of Vinaxuki, said the company might become insolvent if the domestic auto industry goes bust.

SGT