Carmakers want further study of strategic vehicle plan

Vietnam’s carmakers have urged the government to set up a taskforce to study further the proposal that the domestic industry trains its development focus on a strategic vehicle.

“We agree with the necessity of having strategic vehicles for long-term development of Vietnam automobile industry and supporting industries. However, this is a very big and important issue and many things need to be further studied and discussed carefully,” the Vietnam Automobile Manufacturers’ Association (VAMA) said in a statement.

The statement was issued after an urgent meeting last month to discuss a proposal made by the Ministry of Industry and Trade to the government that the auto industry focuses on a strategic vehicle.

The proposal aims to ensure the industry can meet future challenges as it opens up to cheap imports as part of commitments under a free trade agreement signed with the ASEAN grouping.

Akito Tachibana, VAMA chairman, said the taskforce, which would consist of ministries of industry and trade, finance, transportation, science and technology and planning and investment, should be active in the first quarter of next year in seeking better solutions than the proposal.

The ministry has proposed that the auto industry focuses on six to nine-seat cars with engines of less than 1.5 liter capacity as a strategic product. According to the ministry, the choice aimed at both economic and environmental goals.

The association members, however, felt the strategic vehicles should be small, affordable, fuel efficient and multi-purpose, but without limitations in small engine capacity.

The ministry’s proposal for one specific model had a very narrow focus, felt GM-Daewoo, Ford and Vina Star Motor, a joint venture which assembles Mitsubishi in Vietnam.

Ford Vietnam said in the statement that more than one strategic model would be appropriate for Vietnam. It said the models should be unique among Southeast Asian countries so as to facilitate exports from Vietnam.

Honda and Truong Hai Auto, a local assembler, said strategic vehicles were not a priority for the country’s auto development and the government should orient consumer behavior rather than support a certain product.

“Current capacity can be fully utilized first to achieve economy of scale and inefficient models will be eliminated naturally,” said Honda Vietnam. There is very little time to create a brand-new category competitively by 2018, it added.

In different comments, the carmakers said Vietnam’s auto development needed a reduction in the special consumer tax and ownership fees, arguing they have hindered car consumption in the country. The industry also needs incentives for supporting industries, they said.

Vietnam’s auto industry will face threats from opening its market in 2018 when imports from ASEAN member nations will enjoy 0 to 5 percent tax, a steep fall from the current 83 percent. The country will also have to reduce the tax on imports from the WTO members to 70 percent in 2014 and 47 percent in 2017.

This will drive Vietnam into a trade deficit with other car exporting countries, which could be as high as US$20 billion for the industry by 2020.