Local car sector in slow lane

It is hard for local car industry to attract more foreign investment even when Asia’s major car manufacturing base Thailand is hardly hit by ongoing drastic floods.

On October 31, 2011 Honda Japan plans to curtail half of automobile production in the US and Canada, while halting production at its Philippines-based plant in the aftermath of the Thai floods.

In Vietnam, Honda Vietnam thought of revising its automobile production plans from November.

Vietnam’s top car manufacturer Toyota Vietnam (TMV) also made public plans to scaling down manufacturing of multi-purpose vehicles Innova and Fortuner.

A senior industry expert assumed it was rather difficult for the country to woo further foreign capital into the industry though scores of Thai car and spare part manufacturers were hardly hit by creeping drastic floods and it could take time and a big chunk of money for restoration.

So why has the car industry lost attraction to foreign car manufacturers?

Most recently, Toyota Motor Japan decided to pump $250 million for production expansion in Indonesia. The core reason was huge consumption in this market which stands at around 750,000 car units at present and around one million units per year in the near future. Meanwhile, car consumption is forecast at around 150,000 units in Vietnam in 2011, the same as 2010.

“Another key factor was Indonesia having a highly developed supporting industry which remains below par in Vietnam,” said TMV’s general director Akito Tachibana.

TMV made no effort to increase its vehicles’ localisation rate from 2008 until present.

“We once thought of expanding Innova production. However, with constant policy changes, particularly excise tax imposition from April 1, 2009 we scaled down Innova’s production by half to 7,500 units in 2010 against 16,000 units in 2008,” said Tachibana.

“TMV, like other foreign-backed car manufacturers operating in Vietnam, aspire stable policies to expand our footprints in the country,” the top executive asserted.