Carmaker delays on Euro 4 standards

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In an announcement sent to the company late last month, Deputy Prime Minister Hoang Trung Hai stated the prime minister had agreed “in-principle” to allow Chu Lai-Truong Hai engine plant “to manufacture and sell 100,000 diesel auto engines until the end of 2018.”

The government’s permission followed a plea by  Truong Hai Auto Corporation and Quang Nam province’s People’s Committee to allow the automobile maker to continue manufacturing and selling the more polluting Euro 2 and Euro 3 standard engine models after January 1, 2014.

According to a government decision issued back in 2011, all cars and motorbikes manufactured or imported in Vietnam would have to meet Euro 4 emission standards from January 1, 2017 instead of the current Euro 2 and 3 standards.

During the two year extension, Truong Hai must prepare investment plans and upgrade production lines to manufacture higher standard engines.

Chu Lai-Truong Hai was the first auto engine factory in Vietnam, intended to increase the localisation rate for the car industry. The project, situated in Chu Lai Economic Zone, Quang Nam province, is worth $182 million. According to Truong Hai, it signed a technology transfer contract with South Korea’s Hyundai Motor Company to produce about 20,000 Euro 2 and Euro 3 emission standard engines annually.

According to the government’s roadmap Chu Lai-Truong Hai would have to stop manufacturing Euro 2 and Euro 3 standard engines in January 2017. The company had called for the revised timescale as the implementation of higher production standards would make it difficult to produce sufficient numbers of the current engine types within just three years.

Quang Nam People’s Committee pointed out that the technology upgrade for manufacturing Euro 4 engines in such a short time would be very costly, backing the manufacturer’s request to extend the timeline for manufacturing Euro 2 and Euro 3 engines.

Truong Hai previously obtained preferential incentives from the government for the project when recognised as a key national engineering project.

This status allowed the company to take loans up to 85 per cent of project’s total value from the Vietnam Development Bank with a preferential interest rate over 12 years. Truong Hai would also receive a government guarantee when borrowing capital from foreign credit providers. The company also enjoys hugely discounted import and export taxes.