There are now 12 foreign invested automobile assemblers in Vietnam. However, no one can say for sure how many assemblers will still in Vietnam after 2018.
Tachibana, General Director of Toyota Vietnam, has predicted that only three foreign invested automobile manufacturers still exist by 2018. Meanwhile, some experts think that all of the existing manufacturers would leave Vietnam by that time.
Foreign invested automobile enterprises did not say clearly about their future in Vietnam when they were asked about the business plan for the future.
Meanwhile some analysts have imagined that once the automobile import tariff decreases to 0-5 percent, CBU cars (cars under the mode of complete built units) will flock into the market. By that time, domestically made cars will not be able to compete with imports, which will force foreign invested enterprises leave. There will be only the sales agents which distribute import cars and provide post-sale services for foreign manufacturers.
By 2014, the import tariffs to be applied to the imports from ASEAN countries will be slashed to 50 percent. Experts believe that with the tariffs, domestically made products will not be able to compete with imports, let alone the lower tariff of zero percent to be applied by 2018.
The current Vietnamese automobile industry is described as “underdeveloped” with 80 percent of car parts imported from foreign countries. The domestic automobile market is small with the consumption level of 150,000 cars per annum. Meanwhile, Vietnam does not encourage car consumption, while the policies are changeable, which both have automobile manufacturers feel unsafe with their investments.
The Vietnamese automobile industry is believed not to develop strongly enough to satisfy the domestic demand in the next six years. Meanwhile, technical barriers are believed to be unable to prevent imports from flocking to Vietnam, because Vietnam is lagging behind other countries with backward technologies.
Experts agree that the technical barriers to be set up by Vietnam will not be able to prevent the products used more advanced technologies.
For example, Vietnam is now applying the Euro 2 emission standard and planning to apply Euro 4 by 2018. Meanwhile, the standards have been applied in developed countries for a long time already.
Instead of choosing Vietnam, investors are now heading for Indonesia.
Japanese Toyota Group recently has decided to invest 200 million dollars on a production line in Indonesia to make Innovas (70,000 cars per annum). To date, the Japanese automobile manufacturer has 2 production bases in Indonesia already with the capacity of 300,000 cars per annum in total.
Nissan has also announced the plan to invest 320 million dollars in Indonesia to raise the capacity of its plan in the west of Java by three times, and to build an engine assembling plant nearby. Nissan plans to increase the production capacity of the plan from 50,000 to 180,000 cars per annum.
Investors have predicted that Indonesia would become the biggest automobile industry center in South East Asia which is even bigger than Thailand. If so, there will be two big automobile centers in South East Asia which can provide 10 million cars a year to the region with the population of 600 million people.
Meanwhile, over the last 10 years, foreign automobile manufacturers keep indifferent to making investment in Vietnam. Toyota once planned to develop Innova in Vietnam. However, the changeable policies here have discouraged them. More than 10 years ago, Ford also considered Vietnam an attractive destination for investment. However, it is now focusing its investment in Thailand and the Philippines instead of Vietnam.
According to Ngo Van Tru, Deputy Director of the Heavy Industries Department of the Ministry of Industry and Trade, Vietnam would see 166,000-235,000 new cars to join the market by 2015 and 246,000-347,000 cars by 2020. Of this amount, buses and trucks only account for 27 percent, while the remaining are private cars.
Tran Thuy
Business & Investment Opportunities
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