Vietnamese auto industry addicted to imports

An increase in imports has compromised the “Made in Vietnam” strategy for the auto industry, which focused on domestic assembly and production.

Both producers and joint ventures have tended to import vehicles from other Southeast Asian countries rather than focusing domestic manufacturing.

Thailand has the largest auto factories in the region. Although there are plants for Toyota, Honda, Nissan and Mitsubishi in Vietnam, all have opted to import certain models from Thailand rather than produce or assemble them locally.

Ford has decided to invest additional USD800 million into an upgrade of its production facilities in Thailand for the new Ranger and Focus models. Mitsubishi has also announced that it will invest USD532 million into a third plant specialising in the production of i-MiEV electric cars in the neighboring country. General Motors has similar plans.

Under the commitment of ASEAN Free Trade Area (AFTA), since January 1 this year, import tariff on autos with less than nine seats produced in ASEAN countries has been reduced from 83% to 70%.

Despite being offered incentives, the local auto industry has not made any large strides. There is little difference between the prices of domestic and imported vehicles because Vietnamese plants must import components for manufacturing.

According to the AFTA’s roadmap, Vietnam will have to cut auto import tariffs from other ASEAN countries to 0% by 2018 from the current 70%. This will present a great challenge for the Vietnamese auto-making industry.