Auto-makers hit judder bars in a slowing market

Sales of so-called completely knocked down (CKD) vehicles that were assembled from auto parts imported to Vietnam stopped at around 50,000 units during the first nine months of 2012, only half the expected total for 2012. 

These vehicles  accounted for more than 70 per cent of the overall sale, which included fully-assembled imports, according to Vietnam Automotive Manufacturers’ Association (VAMA).

“Should the locally-assembled market continue to go down so drastically, for some brands the cost of maintaining the assembly in Vietnam may exceed the profit generated,” said Laurent Genet, general director of Automotive Asia Limited, Audi’s official importer in Vietnam.

Genet said that without efforts to support the CKD industry, some auto-makers would have to halt assembly  and switch to imports.

In January, when the import tax was reduced for pick-ups, all CKD operators in Vietnam stopped assembly and switched to imports from Thailand.

Isuzu Vietnam’s general director Kenji Matsuoka told VIR that Isuzu Vietnam had transferred to completely built-up units (CBU) instead of CKD for pick-ups because of the lower import tax compared to the cost of importing automotive parts for assembly in Vietnam.  

Matsuoka said the import tax applied for CBU pick-ups imported from Thailand was only 5 per cent. Genet said the tax policy planned a further 10 per cent import tax reduction in 2013 and 2014 and the switch to CBU would gain momentum.

Vietnam reducing import taxes in align with the agreement on trade in goods in ASEAN (ATIGA) is accelerating this trend towards CBU from ASEAN, China, South Korea or Japan further.

“In mainstream segments, CKD players with focused products that minimise product diversity in production should be more resilient.

“For 2012, premium CBU imports are again growing and exceeding CKD sales,” Genet said.  
According to the General Administration of Customs, Vietnam imported around 2,000 CBUs in September, a slight growth of five per cent over the previous month.

The total value hit $62 million, a remarkable increase of nearly 33 per cent compared to the previous month.