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Some foreign invested automobile manufacturers incurring loss: MOIT
2010-1125
The Ministry of Industry and Trade (MOIT) has sent a report to National Assembly’s Deputies, giving answers to the deputies’ inquiries about the current policies applied to automobile manufacturers, and especially, about the car prices which deputies believe “are overly high”.
Market small, competition stiff
A National Assembly’s Deputy from Nghe An province, said that the policies relating to the car import and manufacturing seems to come contrary to the tendency in the world, and that the current car prices are overly high, thus badly affecting consumers’ benefit. A deputy from Hanoi has also requested the Government to reconsider the car pricing. According to him, the prices of domestically assembled cars are nearly the same with the prices of import cars. This has brought fat profit to domestic manufacturers, while forcing Vietnamese people to bear overly high prices.
In the report, MOIT said that it is because Vietnam still cannot make car parts and accessories needed.
“Nearly all car parts and components needed for car assembling must be imported. The car prices are high because of the high taxes. On average, the taxes account for 2/3 of the production costs of cars, especially less-than-9-seat cars – the consumption of which is not encouraged in Vietnam,” MOIT said.
Also according to MOIT, since Vietnam’s car market is still small (which is just ¼ of Thailand’s), while domestically made products have to compete fiercely with imports, not all car manufacturers can make profit.
Some foreign invested car manufacturers are still incurring losses, while some have been bankrupted, including Mekong, Daihatsu.
MOIT has affirmed that the car production and assembling in Vietnam has brought much benefit to the community. Some kinds of domestically made products, such as trucks, specialized vehicles and buses have been dominating the market. The products have high local content ratio and reasonable prices. The automobile industry has created 70,000 jobs.
Regarding the story that the prices of domestically assembled cars are not much lower than the prices of import cars, MOIT thinks that domestic products are still a good choice because buyers can enjoy better post-sale services when they buy domestic products.
Manufacturers still not follow commitments on localization ratio
A deputy from Quang Ninh province has requested the Government to reconsider the incentives offered to automobile joint ventures, because the manufacturers do not follow the commitments on raising the localization ratio.
MOIT, on one hand, admitted that the localization ratio remains low, on the other hand, said that it is because the car market in Vietnam is still too small, which does not encourage manufacturers to invest more to increase the localization ratio.
In 2008, the total number of domestically assembled vehicles reached 152,509 units, which means that every of 50 enterprises assembled 3,000 vehicles and 380 cars were assembled for every model. The figures show that the market is too small to persuade manufacturers to spend more money to increase the localization ratio.
Toyota Vietnam has been pioneering to increase the localization ratio with 37 percent of car parts of Innova made domestically. The manufacturer has also invested in making car parts and components for export, earning $20 million a year from the exports.
MOIT has affirmed that in the time to come, when Vietnam focuses on developing the strategic car line which has big consumption volume, the localization ratio will be higher. The strategic car line must satisfy some requirements. They must fit Vietnamese people’s consumption habits, have competitive prices, and they must be safe, energy saving and friendly to the environment.
MOIT is drawing up the plan on developing supporting industries and the draft strategy on automobile industry development by 2020.
Market small, competition stiff
A National Assembly’s Deputy from Nghe An province, said that the policies relating to the car import and manufacturing seems to come contrary to the tendency in the world, and that the current car prices are overly high, thus badly affecting consumers’ benefit. A deputy from Hanoi has also requested the Government to reconsider the car pricing. According to him, the prices of domestically assembled cars are nearly the same with the prices of import cars. This has brought fat profit to domestic manufacturers, while forcing Vietnamese people to bear overly high prices.
In the report, MOIT said that it is because Vietnam still cannot make car parts and accessories needed.
“Nearly all car parts and components needed for car assembling must be imported. The car prices are high because of the high taxes. On average, the taxes account for 2/3 of the production costs of cars, especially less-than-9-seat cars – the consumption of which is not encouraged in Vietnam,” MOIT said.
Also according to MOIT, since Vietnam’s car market is still small (which is just ¼ of Thailand’s), while domestically made products have to compete fiercely with imports, not all car manufacturers can make profit.
Some foreign invested car manufacturers are still incurring losses, while some have been bankrupted, including Mekong, Daihatsu.
MOIT has affirmed that the car production and assembling in Vietnam has brought much benefit to the community. Some kinds of domestically made products, such as trucks, specialized vehicles and buses have been dominating the market. The products have high local content ratio and reasonable prices. The automobile industry has created 70,000 jobs.
Regarding the story that the prices of domestically assembled cars are not much lower than the prices of import cars, MOIT thinks that domestic products are still a good choice because buyers can enjoy better post-sale services when they buy domestic products.
Manufacturers still not follow commitments on localization ratio
A deputy from Quang Ninh province has requested the Government to reconsider the incentives offered to automobile joint ventures, because the manufacturers do not follow the commitments on raising the localization ratio.
MOIT, on one hand, admitted that the localization ratio remains low, on the other hand, said that it is because the car market in Vietnam is still too small, which does not encourage manufacturers to invest more to increase the localization ratio.
In 2008, the total number of domestically assembled vehicles reached 152,509 units, which means that every of 50 enterprises assembled 3,000 vehicles and 380 cars were assembled for every model. The figures show that the market is too small to persuade manufacturers to spend more money to increase the localization ratio.
Toyota Vietnam has been pioneering to increase the localization ratio with 37 percent of car parts of Innova made domestically. The manufacturer has also invested in making car parts and components for export, earning $20 million a year from the exports.
MOIT has affirmed that in the time to come, when Vietnam focuses on developing the strategic car line which has big consumption volume, the localization ratio will be higher. The strategic car line must satisfy some requirements. They must fit Vietnamese people’s consumption habits, have competitive prices, and they must be safe, energy saving and friendly to the environment.
MOIT is drawing up the plan on developing supporting industries and the draft strategy on automobile industry development by 2020.
Source: Vietnamnet
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