Ford: it’s not the right time to make big investment in Vietnam

2010-1021

Ford’s ASEAN President Peter Fleet, on one hand, said Vietnam has great potentials to develop automobile industry, but on the other hand, he added that big problems still exist, thus hindering large investments in Vietnam.

In the recent interview given to Thoi bao Kinh te Vietnam, he said that Vietnam has great advantages to develop the automobile industry. The Government of Vietnam wishes to turn the automobile industry into a key industry. Meanwhile, Vietnam also has great advantages in the labour force. Over the last 15 years of operation in Vietnam, Ford has only seen little changes in its workforce, because workers all commit to work for the company for a long time.

However, though being satisfied with the workforce and the business performance in Vietnam, Ford only makes modest investment in Vietnam, while it has been expanding its factories in other South East Asian countries.

Recently, Ford has announced the decision to expand its investment in Thailand by setting up a new factory, the first 100 percent Ford invested factory. It is clear that Thailand is considered the main production site of the big automobile manufacturer in South East Asia.

When asked why Ford does not think of expanding its factory in Vietnam, he said that the current factory in Vietnam is still not running at full capacity. Therefore, Ford still expects other opportunities to come that allow the manufacturer to expand their investment.

In fact, Ford is considering exporting the products assembled in Vietnam, especially Ford Transit which has been selling very well in the domestic market. Mr Peter Fleet said Ford Vietnam is now the only factory which makes this product and Ford Vietnam is considering exporting Transit to other ASEAN countries, if the Government applies policies to encourage exports.

In order to export products to other countries in the region, according to him, it is necessary to set reasonable export tariffs (the tariff should be at zero percent or very low levels). Cars will only be exported to ASEAN countries if they have the minimum localization ratio of 40 percent. Therefore, Ford hopes that the Government of Vietnam will set up the policies encouraging export development of supporting industries. The latter is considered crucial for automobile manufacturers to obtain the required localization ratio of 40 percent.

Regarding the car prices, Mr Peter Fleet said the prices in Vietnam now are much higher than that in other countries in the region, blaming this on high taxes. He said taxes account for more than 60 percent of the sale price of a car. Meanwhile, the figure is much lower in Thailand.

Besides, the low output and the small scale of the market have both been cited as the reasons behind the high sale prices. Since the market scale is small, manufacturers are not motivated to expand investment and increasing the localization ratio of products.

Ford officially set foot on Vietnam in 1995, when it joined forces with Vietnamese Song Cong Diesel Company to set up a joint venture – Ford Vietnam - capitalized at $102 million. This was the biggest foreign invested project in Vietnam at that time. In 2009, Ford decided to spend $10 million more to install the production line that assembles Mondeo cars.

Source: TBKTVN