Automobile firms have been rushing to boost productions in Vietnam to prepare for a boom in the local market which is forecast to soon surpass Malaysia and Singapore.

According to Kenichi Horinouchi, director of Mitsubishi Motors Vietnam, the Vietnamese automobile market has seen an impressive growth which is expected to outperform Malaysia and Singapore in the coming time, to rank the fourth position in Southeast Asia in terms of car sales just behind Thailand, Indonesia and the Philippines.

Singaporean newspaper The Straits Times in July this year reported that automobile sales in Vietnam surged 37.6% in 2014, highest in the Southeast Asian region.

Singapore has been forecast to top the region with a rate of 30% annually in car sales in the 2015-2019 period, however, the newspaper said that Singapore's position faces strong challenges from the Philippines and Vietnam with its low levels of vehicle ownership and a strong consumer strength.

So, it is the reason Mitsubishi Motors Vietnam has decided to inject more capital into its auto assembly facility in Vietnam to expand production, Kenichi Horinouchi said. He added that the Outlander, which is manufactured in Japan, is the next completely built-up model of Mitsubishi to be imported into Vietnam after Triton, Attrage and Mirage which come from Thailand. Therefore, there is speculation that Mitsubishi Motors Vietnam could shift to importing CBUs rather than assembling vehicles in the country.

According to Kenichi Horinouchi, director of Mitsubishi Motors Vietnam, the Vietnamese automobile market has seen an impressive growth

Other companies such as Ford Vietnam, Toyota Vietnam, Vina Mazda, Hyundai Thanh Cong have also increased their investments.

According to the  Vietnam Automobile Manufacturers Association, car sales in Vietnam in July this year reached 28,004, up 15% compared to June and 38% compared to July last year. With this growth, Vietnam's car imports are expected to be at 300,000 in 2016.

Challenges for local car manufacturers

Experts said that the car sales growth in Vietnam is attributed to the country's economic growth. After some years of slower economic growth, the Vietnamese economy is looking stronger again, and Vietnam’s income per capita is reaching a stage where increasing car ownership is to be expected.

Meanwhile, car is a more tempting option for many urban residents in the context of the worsening of both traffic and air pollution in cities. They think using a car is a safer and ‘healthier’ option.

Besides, owning a car seems to now occupy a central position in the aspirations of the country’s rapidly growing middle class.

These changes are likely to lead to another boom in car consumption, however, put a threat to local auto manufactures.

The import of completely built units (CBUs), from Thailand and Indonesia into Vietnam are on the rise, weighing on the fate of domestically assembled cars, particularly after 2018 when duties on CBUs from Southeast Asian countries will be reduced gradually before being fully exempted by 2018 in line with ASEAN Trade in Goods Agreement.

Meanwhile, the car industry in Vietnam is still small and has ailing supporting industries, so maintaining the sector will be difficult for the local government.