Despite difficulties, foreign auto manufacturers still squeeze into Vietnam

Published: 17/04/2013 07:28



While keeping complaining about the small scale of the Vietnamese market and the changeable policies, foreign automobile manufacturers still have been flocking to Vietnam.

Betting on the future

Analysts have forecast that about 100,000 cars would be sold in 2013, a modest figure for more than 10 big automobile manufacturers in Vietnam.

However, the manufacturers believe that Vietnam’s market would be bigger after 2020, when Vietnam’s income per capita reaches $3,000 per annum. It’s now the right time for automobile manufacturers to join the market and prepare for the market boom in some more years.

French Peugeot Citroen, for example, has cooperated with Vietnamese Truong Hai to assemble and distribute Peugeot brand products. Rolls-Royce has also found the distributor in Vietnam and it is going to introduce the first authorized agent. Lexus would make its official presence in Vietnam by the end of 2013. Mazda, after leaving Vietnam in 2012, has returned to set up a factory and import products for domestic sale.

Boosting sales proves to be not the most important goal for the new comers. They would pay more attention to the branding, developing the post-sale services and do everything they can to prepare for the boom.

The automobile manufacturers, though putting a high hope on the enlargement of the Vietnamese market, have said they are not sure if they would set up production bases in Vietnam. 

The marketing director of a new automobile group said that the group’s leadership is still waiting and seeing how the policies would be. In case the policies do not facilitate the production, the manufacturer would merely import cars to Vietnam for domestic sale.

Preparing themselves for the new period

The biggest automobile manufacturers in Vietnam have been making hectic preparations for the new development stage which would come in 2018, when the import tariff on the imports from AFTA zone decreases to zero percent.

They would not make the car models with low sales in Vietnam, but would simply import the products for domestic consumption. They would only focus on making some 1-2 car models with high output, while pushing up the localization process to cut down the production costs and become competitive with import models.

However, the automobile manufacturers also said nothing special has been made yet until they can see the policies to be laid down by the government of Vietnam. Their production plans would fail completely with the unfavorable policies which make it unable for them to compete with the imports.

Incentives would be given to domestically assembled cars

The Ministry of Industry and Trade is nearly completing the drafting of the industry development strategy by 2020 to be submitted to the government. 

The ministry believes that the current tax rates are overly high, which makes the market not big enough to encourage automobile manufacturers to localize their production.

Therefore, it has suggested three scenarios of tax reductions. 

With the first scenario, Vietnam would cut 30 percent of the luxury tax and the vehicle registration ownership tax rate on the cars with the cylinder capacity of less than 2.0L.

The ministry has suggested the 50 percent tax reduction for the second option, and the 70 percent tax rate reduction for the strategic car line in the third scenario.

The second one is the most favored by the industry.


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