Reports from the Ministry of Industry and Trade (MIT) show a gloomy picture and huge inventory of the automobile companies since 2008 until now.

Vietnam fails to localise auto manufacturing industry

Vietnam Automobile Manufacturers' Association forecast domestic producers will only be able to make 80,000 vehicles in 2012, down 34%-38% compared to last year, which would mark a low productivity.

From now to 2018 the import tariff for fully-assembled automobiles may be lowered and exempted in line with the ASEAN-China Free Trade Agreement, Vietnamese auto manufacturers may stop operation and choose to import fully-assembled vehicles instead of manufacturing.

The MIT also pointed out that most of the production quotas set in Government's plan for automobile development in 2004 are not met, especially the quotas for producing engines for automobile. For example, the goal was to produce 100,000 diesel engines in 2010, but this received little support from manufacturers. Only in 2012 did Truong Hai Auto Company start to build a diesel engine factory.

Experts have said that support industries in Vietnam are weak. There are about 210 enterprises in the industry, but most of them only produce simple component parts. The number of enterprises in support industries in Vietnam is only one fifth of that of Indonesia and one fiftieth of that of to Thailand. Domestic manufacturers have largely failed in localising the industry. 

Many also lay blame for this on incomprehensive policies. The MIT said the current infrastructure in Vietnam is not favourable for the industry's development.

To ensure the stability of the traffic and infrastructure, the Government has issued a number regulations, such as high taxes and limitations on the number of personal vehicles, which has caused trouble for the auto companies. The automobile development plan for the period of 2001-2010 has proven largely ineffective and unconducive to the real situation.

The MIT suggested keeping import taxes for automobiles high until 2018 to encourage domestic manufacturers and exempt import taxes for materials and component parts that Vietnamese manufacturers cannot provide.