Auto firms given stability promise

The domestic car industry is now offered long-term stability through a new master plan

“The Vietnamese government realised that there were barriers to the development of the automobile industry and is trying to remove them through a long-term master plan. The purpose is to develop an automobile industry strong enough to compete with other countries in the region,” said Nguyen Thi Xuan Thuy, head of Strategy and Integration Policy Division under the Industrial Policy and Strategy Institute.

Thuy, who is also a member of the master plan’s drafting team, said the Vietnamese government wanted to attract more car foreign investors into the industry by reducing taxes and fees. Even though the master plan has not yet been approved, it offers a bright outlook for car-makers.

Kiyoshi Teshima, deputy director of Vina Star Motor – a subsidiary of Mitsubishi Motors in Vietnam, said he hoped the Vietnamese government would maintain stable policies for the car industry.

“Tax reductions are also indispensable to motivate customers to buy new cars,” said Teshima.

Over past years, the Vietnamese government has deliberately restricted the growth of the domestic car market because of chronically bad traffic infrastructure. The policy includes high taxes and fees imposed on cars, meaning cars in Vietnam are three times more expensive than other markets.

Vietnam’s car ownership currently averages at 20 cars per 1,000 people, according to the Ministry of Industry and Trade.

“The difference about the new master plan is that the government will encourage the growth of the car market,” said Thuy, adding that a ratio of 50 cars per 1,000 people in the next ten years was being targeted. “Although the market is still small now, there will be huge opportunities for car-makers once the new master plan is approved.”

Vietnam’s car industry began in the early 1990s when foreign car-makers like Toyota and Ford started building factories in the country.

Statistics from the Industrial Policy and Strategy Institute showed that there were around 300 domestic and foreign companies operating in the car industry in Vietnam, with Toyota Vietnam as the biggest player, followed by local firm Truong Hai. However, all of them operate on a small scale and boast a localisation rate for components of just 10 per cent.

Jesus Metelo N. Arias Jr, chairman of Vietnam Automobile Manufacturers’ Association, in an interview last month with VIR said that the lack of clear and stable policies had hindered the development of the car industry in Vietnam.

Arias, also managing director of Ford Vietnam, stressed foreign car-makers and suppliers would continue to invest in Vietnam but only if the government maintained a stable policy and reduced business costs.