Zone’s manufacturing engine is revving

illustration photo

In early August 2011 South Korea’s Hyundai Group and Vietnam’s Thaco inked a landmark cooperative deal for auto engine manufacturing.

With $165 million in the first phase, the Chu Lai OEZ joint venture project with 51 per cent of the chartered capital contributed by Hyundai and the remainder offset by Thaco will churn out around 25,000 4L diesel engines for light trucks per year.

“The Hyundai Thaco auto joint venture is not only substantial for local car-making industry but it is also crucial to the supporting industry development,” said Minister of Industry and Trade (MoIT) Vu Huy Hoang.

Construction of the plant would start this month and the South Korean-based group expects the plant will come online in October 2012. The joint venture plant’s production capacity will be hiked gradually to reach 100,000 engines per year.

The plant’s output will gear towards local market and be partly exported to China and other Hyundai plants in different countries.

“Vietnam is a market with growing importance for Hyundai and is now part of our global production chain via the engine cooperative deal,” said Hyundai vice chairman Choi Han Young.

Since July 2010 the South Korean-based group has transferred technologies to Thaco for manufacturing Thaco-Hyundai branded commercial vehicles such as 2.5 to 25 tonne trucks, specialised vehicles, 25 to 47-seat passenger cars and bed-equipped passenger cars.

According to Chu Lai OEZ Authority deputy chairman Do Xuan Dien, South Korean’s Kia Group recently agreed to resume negotiations for an auto manufacture and assembly project with an annual capacity of 100,000 units. The plant will become online in 2015 and aim a localisation rate of 47 per cent right in the first year going into operation.

Reality shows that from 2003 up to now Thaco pumped VND8 trillion ($386.4 million) into Chu Lai OEZ to establish the Chu Lai-Truong Hai auto complex first phase which includes four auto manufacturing plants, five spare part plants, Tam Hiep port, bonded warehouses and a manpower vocational training facility over 234ha.

That was partly why central Quang Nam province and Chu Lai OEZ decided to build a general engineering and auto centre over 7,800ha at Chu Lai OEZ, of which the auto engineering part alone covers 2,800ha to woo domestic and foreign investors into auto engineering fields.

To appeal to investors, Quang Nam province proposed a number of investment incentives such as for 70-year term projects not collecting land rental over the project’s whole life, supporting part of the land acquisition and people’s resettlement costs, offering 10 per cent corporate income tax reduction in the first 30 years, applying export processing zone enterprise status when at least 70 per cent of the products being exported.

In respect to those proposals, a MoIT executive said in the past years the government offered special investment incentives to several potential projects to help lure in foreign investments.