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Roundup: Potential withdrawal of foreign auto firms to benefit Vietnamese peers

Xinhua, February 28, 2017 Adjust font size:

The potential withdrawal of foreign auto companies in Vietnam will create favorable conditions for domestic peers to develop, stated many experts and representatives of Vietnamese auto firms.

Takimoto Koji, head of the Japan External Trade Organization (JETRO) in Vietnam's Ho Chi Minh City, has recently announced results of a survey of operation and business of Japanese firms in the Asia-Pacific region in 2016. Accordingly, Japanese carmakers may shrink their auto production abroad.

Japanese auto firms, which currently have operations in Vietnam, said they will focus on manufacturing vehicles in Thailand and Indonesia then export them to Vietnam, especially after 2018, when automobile import taxes will be axed to zero percent.

According to Koji, Vietnam's automobile market is some 250,000 units a year, too small compared with around the Thai market of two million units. Meanwhile, auto makers in Vietnam are facing fierce competition, with a single maker being able to annually sell about 50,000 vehicles at most. To be profitable, a firm's production line has to produce, on average, around 200,000 automobiles a year.

However, the JETRO representative said that the possibility of Japanese auto companies closing or shrinking car production and assembly is low.

Many carmakers in Vietnam have proposed the Vietnamese government give them more incentives to increase localization rates.

At present, the localization rates are not high as targeted, but the Vietnamese government should not offer more tax incentives to vehicle makers, said local economist Pham Chi Lan.

Directors of many Vietnamese auto assemblers and traders have echoed her statement.

To encourage Vietnamese enterprises to producer more auto parts and accessories, Vietnam should have stronger measure such as imposing higher import taxes on spare parts, and offering soft loans for design and machine purchases, said Bui Ngoc Huyen, chairman of local auto firm Xuan Kien Vinaxuki. Vietnam should levy import taxes of 30-40 percent on auto parts like China does.

"Vietnam should include production of cars' and trucks' parts in its strategy on mechanical development to raise automobile localization rates. Having the world's 15th biggest population, Vietnam should have an automobile industry," said Huyen.

According to Vietnam's plan on developing its automobile industry till 2020 with vision to 2030, recently approved by the government, the country will basically form an automobile supporting industry by 2020.

Vietnam will strive to meet 35 percent of demand for components and spare parts used to produce and assembly vehicles in the country by that year.

According to the Vietnam Automobile Manufacturers' Association, vehicle producers and assemblers in the country posted total sales of 20,232 units in January, down 39 percent against December 2016, and down 13 percent against January 2016.

Of the 20,232 units, 14,749 are passenger cars, 5,098 are commercial vehicles, and 385 are special-purpose vehicles. Enditem