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Auto seminar ponders ways to develop VN’s stagnant car industry
Infrastructure development and tax policies are
vital to boosting
Speaking at a seminar titled “Automobile Market,
Supporting Industries, Transport Infrastructure and Development Platform for a
Stable Automobile Industry”, deputy director of the Ministry of Industry and
Trade’s Heavy Industry Department Ngo Van Tru said if the country wanted to
develop the car manufacturing industry, it could not rely on truck and bus
development only as this segment would become saturated in 2018.
Tru commented that between 2008 and 2009, as import
and special consumption tax and registration fee dropped, local consumers took
the opportunity to buy cars, resulting in scarce supplies.
Elaborating on why domestic manufacturers could not
meet rising domestic demand, Tru said manufacturers already had their
production plans for the whole year, that was why they could not meet the
sudden spike in demand from consumers at that time.
He also said: “Many local manufacturers are quite
small in terms of their scale of production. We have to develop strategic
measures to promote the domestic automobile industry so that we can attract
supporting industries.”
Tru also cited the sluggish rate of localisation,
saying that Viet Nam was now home to 54 car manufacturers, each on average
capable of manufacturing and assembling 2,800 units per year.
Huge variety
There were now 400 kinds of automobiles in the
country; however, the volume of each model was quite small, resulting in greater
difficulty in further localising production and component manufacturing.
As a result, investment in producing car
spare-parts for the local car manufacturers was less attractive to foreign
investors due to low cost efficiencies.
Domestic manufacturers were at a disadvantage in
exporting spare parts to other countries as local manufacturers largely relied
on imported materials for production.
The country’s economic development had been
dramatic while infrastructure development could not keep pace with growth and
that had resulted in a conflict between production, consumption and
infrastructure capabilities.
He also mentioned changing tax policies that had
caused difficulties in car manufacturing and assembly plants, discouraging both
producers and investors.
Nguyen Van Phung from the Ministry of Finance’s
Taxation Policy said tax always contained a conflict of interest, citing that
importers always wanted the ministry to reduce import tax while local producers
wanted the ministry to raise import prices to protect local production.
Protection needed
In an attempt to develop the car manufacturing
industry in line with its international commitments,
Phung said the ministry would use taxes and charges
in a holistic way, based on the reality of the situation, in a fair, public and
transparent manner.
By 2019, 2.5-litre cars will enjoy export tax
reductions from 90 per cent to 52 per cent. To avoid trade fraud, all kinds of
passenger cars will enjoy a 47-per-cent tax rate by 2017.
In the process of the ASEAN free trade area tariffs
reduction framework (CEPT/AFTA), from January 1, 2006, 10-seat passenger cars
and trucks have enjoyed a tax reduction to 5 per cent since 2006. The nine-seat
cars will enjoy a zero tax rate by 2018, according to Phung.
According to the Ministry of Industry and Trade,
after 2020, the coach and bus fleet will develop in line with Vietnamese economic
development and the generalised spreading of mass motorised transport.
Apart from giving priority to the development of
trucks and buses, the Vietnamese car industry needs to outline a clear
orientation for the development of tour buses and coaches.
