CBUs now the way to go?

International car firms are pushing the introduction of complete built automobiles into Vietnam.

In late December 2010, Taiwan’s Yulon Group shipped the first batch of dozens of its Luxgen multi-purpose vehicles (MPV) to Vietnam.

The seven-seat Luxgen vehicles are fully assembled in Taiwan and were introduced for the first time in Vietnam Auto & Petrol Expo 2010 in Ho Chi Minh City last June.

According to Luxgen chief K.C. Hu, Vietnam offered a great opportunity for the firm to further showcase its brand positioning in South East Asia.

The company is also working to develop its distribution channels for Luxgens in overseas markets like Vietnam, American nations and the Middle East.

Under Vietnam’s commitments in the Common Effective Preferential Tariff (CEPT) scheme for the ASEAN Free Trade Agreement, the country will have to cut import tariffs on complete built unit (CBU) vehicles to zero per cent by 2018.

The Ministry of Finance recently announced that in 2011, the import tariff on some CBU cars would go down from 77-83 to 72-82 per cent.

Notable car firms in Vietnam for years have promoted CBU imports into the country.

In late December 2010, Nissan Vietnam Co. Ltd, a joint venture between Nissan Motor Company of Japan and Tan Chong Motor Holdings Berhad of Malaysia, introduced the five-seat premium sports utility truck Nissan Navara in Vietnam, which will be then sold by the entire Nissan nationwide dealership network.

The company has also planned to introduce some other imported models in 2011 in Vietnam.

Toyota Vietnam and Mercedes Vietnam are pioneering the importing of CBU cars for domestic sale.

Especially, Toyota Vietnam has stopped assembling Toyota Land Cruiser vehicles in Vietnam to focus on selling CBU imports.

Toyota Vietnam’s president Akito Tachiban said the company was importing Hilux pick-up trucks from Thailand and Land Cruisers from Japan for sale in Vietnam.

Local car-makers said Vietnam would not have much time to 2018 to upgrade domestic production and cut tariffs. Many of them have already revealed plans to import cars instead of making them in Vietnam.

“The action [import tax cut] will create a negative effect on the car-makers because we have made plans for production and business based on the CEPT commitments. At present, due to the low competitiveness of Vietnam’s car industry and the low developed supporting industry, CEPT roadmap should be clear so that we can have long-term strategy and plan for stable development in Vietnam,” Tachibana told VIR. “Therefore, step-by-step, the reduction is required to help local industry have some lead-time to comply with CBU competition and also to reduce trade deficit.”

Honda Vietnam, one of the manufacturers whose cars have the highest local content, announced that it would import the medium class Honda Accord to sell in Vietnam from 2011.

To date, Honda Vietnam has been assembling a sedan model, Civic and a five-seat CR-V MPV sports car at its factory in Vietnam.

In 2010, Vietnam imported 53,140 CBUs worth $959 million. Vietnam Automobile Manufacturers’ Association members are expected to sell more than 100,000 vehicles to the domestic market this year.