Auto

Cooperation crucial to build competent auto industry

April 30, 2021 by www.vir.com.vn

Local automobile businesses are dependent on major foreign car manufacturers and their core technologies, a sticking point for true progress, photo Le Toan

Vietnam has received praise for its control of the pandemic, which has also contributed to its prestige among South Korean businesses. “Vietnam’s auto parts sector has reached an export scale of $5 billion and an import volume of $4 billion, thus attracting many South Korean businesses during the past three years,” said Lee Jong Seob, president of the Korea Trade-Investment Promotion Agency (Kotra) in Southeast Asia-Oceania and general director of its branch in Hanoi. Seob came to Vietnam under a special entry programme nine months ago.

According to Seob, Vietnam’s auto part exports are in the high growth group. In 2020, these exports grew by 48.6 per cent but “have not yet entered a stable period”, Seob pointed out, adding that “the development of the auto-business in Vietnam is based on the understanding of the government’s policymakers, promoting a business strategy that is consistent with the reality of Vietnam.”

Lagging behind

In mid-April, VinFast – a subsidiary of Vingroup – announced that it would sell three electric car models in the US market in 2022. Previously, VinFast introduced the Sedan Lux A 2.0 and SUV models. The Lux SA 2.0 participated in the international exhibition of the Paris Motor Show, one of the largest auto events in the world, and received an enthusiastic reception from the international public.

Vietnam may already be on the map of the world’s auto industry, but there is still a lot to do to gain a firm foothold in the global market, such as the right policies to develop the production of auxiliary automobile products.

A panorama of Vietnam’s auto industry was faithfully described by Pham Tuan Anh, deputy director of the Ministry of Industry and Trade’s (MoIT) Industry Agency at a seminar hosted by the ministry’s Trade Promotion Agency and Kotra that took place last week.

Vietnam’s car production has increased steadily in recent years, from around 287,000 vehicles in 2018 to 323,000 in 2020 – figures which include manufactured and assembled vehicles. The responding growth rate of the industry amounted to 2 per cent per year. However, despite the increase, Vietnam’s automobile industry remains behind other regional countries such as Thailand, Indonesia, and Malaysia.

Vietnam has 50 companies operating in automobile assembly, 45 companies manufacturing chassis and vehicle bodies, and over 200 companies producing spare parts, data from the MoIT shows. However, local businesses are only participating in the lower ends of the value chains in the automobile industry and are heavily dependent on global automobile manufacturers as they are not yet proactive in the development of core technologies.

The production and assembly of Vietnamese automakers have not yet met the criteria in the global industry and have not created links among businesses in manufacturing, assembling and spare parts, as well as with large-scale suppliers of raw materials.

While some companies are participating in the global supply chain, domestic automakers are still dependent on technological factors and the designation and distribution decisions of major manufacturers worldwide. Similarly, domestic suppliers only produce basic components, mainly for welding and painting.

Meanwhile, one of the MoIT’s regulations on the development of the country’s supporting industries lists conditions for companies to enjoy tax incentives. The Industry Agency’s deputy director Anh said, “South Korean supporting businesses make good use of an overwhelming number of incentives from the Vietnamese government’s auto industry development policy.”

The domestic automobile industry – with one of its focal points being spare parts – is one of the important industries for the nation’s industrialisation and has thus been given special incentives by the government, such as the prime minister’s Decision No.1168/QD-TTg from 2014 and the new Law on Investment, which reaps not just investment incentives for the industry but also additional ones to develop assembly activities.

Roadmap for localisation

Vu Ba Phu, director of the MoIT’s Trade Promotion Agency, sees a great opportunity for Vietnamese industrial parks and manufacturing enterprises to connect with South Korean businesses and invest in and cooperate in developing the value chain manufacturing auto parts.

In Vietnam, the production capacity of Hyundai Thanh Cong reaches 100,000 units. “We plan to develop more auto parts in Vietnam as the government has issued policies to focus on localisation,” said Yang Yun Goo, general director of Hyundai Thanh Cong.

Currently, the company does not directly manufacture auto parts itself but cooperates with local businesses to gather supplies of components.

The government already has preferential programmes for imported parts. However, the support of these programmes is not enough to lower car prices as the current tax remains relatively high compared to regional countries.

As the nation is further opening its market, Vietnam signed many free trade agreements (FTAs), but the implementation of technical factors under these schemes has received many reactions from several countries around the world.

Regulations on importing vehicles into Vietnam are an example of the remaining barriers. Luong Duc Toan, deputy director of the Industry Agency’s Department of Processing and Manufacturing, believed that Vietnam has been “unlucky”, similar to Thailand, when developing its industry at a time of blossoming bi- and multilateral FTAs as well as increased barriers. However, the application of technical measures by the Thai government has not suffered as many harsh reactions as Vietnam.

According to Toan, regulations on the production of spare parts imported by the Thai government in the 1980s did not receive any negative response. At that time, investing in manufacturing components in Thailand always followed the conditions of the supply chain.

The kingdom’s market capacity of around one million vehicles per year has also been an important factor contributing to the development of supporting industries and a sharp reduction in the cost of domestically produced vehicles.

Thailand had chosen the best time to become a country with a developed automobile industry in ASEAN, Toan said, with most major automakers wanting to enter Thailand as they turned the country into a car hub.

Meanwhile, Vietnam’s consumption of about 600,000 vehicles per year will increase to one million units by 2030. Companies like Hyundai Thanh Cong see this the reason to open cooperation with partners and speed up the localisation of spare parts manufactured in Vietnam as they hope that the localisation rate will increase to 40 per cent.

“We have had many visitors looking for opportunities to cooperate with spare part manufacturers in Hanoi and other regions,” said Kim Kwang Young, regional deputy director of Hyundai Thanh Cong. “The localisation rate of 40 per cent cannot be achieved in the short term. Instead, the government needs a roadmap to develop supporting automotive industries sustainably.”

Currently, the Vietnamese market is still small, and even if it is localised, the costs will not be reduced in the short term but may even increase over time.

Young pointed out that it may be simpler and less risky to let foreign enterprises invest in Vietnam and import components for assembly than building ancillary factories. However, the initial investment costs are huge, and these procedures also take a lot of time. That is why foreign businesses remain cautious in expanding investments in Vietnam.

According to Young’s observations, domestic manufacturers do not have much incentive to import complete units. “On the contrary, we have to bear many costs related to building factories or training workers. This situation leads to difficulties for businesses who want to invest in the Vietnamese market,” he added.

Kim also hopes that the government will soon have appropriate incentives to develop a supporting industry network, helping businesses of both countries to use each other’s products, which could benefit to local customers and contribute to the development of Vietnam’s automobile industry.

By Hai Anh

Auto sales signal recovery with 58 pct surge

May 13, 2021 by e.vnexpress.net

This sales figure marked an increase of over 3,600 units from the same period last year when the first wave of Covid-19 had hit the country, according to the Vietnam Automobile Manufacturers Association (VAMA).

The sale of passenger and commercial vehicles were respectively up 55 percent and 66 percent year-on-year, it said.

The Truong Hai Auto Corporation (Thaco) led sales with a year-on-year increase of 73 percent to 35,389 units, followed by Toyota with 18,973 units, up 15 percent.

Mitsubishi, Honda and Ford made up the rest of the top five auto sellers in the first quarter.

Hyundai Accent continued to be the best-selling car with 2,150 units sold in April, followed by Toyota Vios and VinFast Fadil.

Auto sales had fallen by 8 percent to 296,634 units last year as the pandemic hit people’s incomes and discretionary spending.

Auto sales surge 53 pct

June 10, 2021 by e.vnexpress.net

Passenger vehicles accounted for 70 percent and commercial and special-purpose vehicles for the rest, according to the Vietnam Automobile Manufacturers Association (VAMA).

Truong Hai Auto Corporation, which manufactures its own vehicles and assembles foreign brands such as Kia and Mazda, led with nearly 44,000 units, a 67 percent rise.

It was followed by Toyota with over 24,100 units, up 16 percent.

Mitsubishi, Honda and Ford made up the top five.

Last year sales had fallen by 8 percent to 296,634 units as the Covid-19 pandemic badly affected the economy, hitting people’s incomes and discretionary spending.

Unlocking Vietnam as a promising auto market

June 1, 2021 by vietnamnet.vn

The competition in the Vietnamese automobile market is increasingly fierce, being fuelled by various bilateral and multilateral trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership,

the Regional Comprehensive Economic Partnership, and the EU-Vietnam Free Trade Agreement. At the regional level, Vietnam has removed import tariffs on cars from ASEAN countries since 2018 as part of their ASEAN Free Trade Agreement commitments.

Unlocking Vietnam as a promising auto market

The removal of market barriers as a result of Vietnamese commitments under these agreements, coupled with a fast-growing middle-class, promote Vietnam to become a promising market for major automobile manufacturers from Japan, South Korea, the United States, and the European Union.

However, domestic automotive production faces many disadvantages such as a low localisation rate, which makes the prices of domestically manufactured and assembled cars higher than imported ones. Vietnam’s automobile production and assembly have the lowest localisation rate – specifically, trucks under seven tonnes have an average rate of over 20 per cent; passenger cars with 10 seats or more is 45-55 per cent; and personal cars of nine seats is 7-10 per cent (except for Toyota’s Innova car which reached 37 per cent). Vietnam’s localisation rate is the lowest compared to ASEAN countries such as Thailand, Indonesia, and Malaysia.

According to the Ministry of Industry and Trade, Vietnam boasts over 50 automotive plants with 18 foreign-invested enterprises and 38 domestic companies. The three major auto manufacturers of Truong Hai Auto Corporation (THACO), Toyota, and Mitsubishi Vietnam account for more than 70 per cent of the market share. THACO ranks first with 35.5 per cent market share, followed by Toyota on 24.9 per cent, and Mitsubishi at 10.2 per cent.

It can be seen that Vietnam has an oligopoly automobile market. The first characteristic of this market is it has few major players. One of the greatest barriers to entry in the automobile industry is the extremely high amount of capital required to purchase physical manufacturing plants and raw materials, as well as to hire and train employees. It takes a great amount of capital, not only for the manufacturing process but also to keep up with the latest innovations in order to compete with the industry leaders.

Therefore, the number of automobile manufacturing and assembly enterprises is stable, there are almost no new enterprises entering the market. In the field of automobile import and distribution (including new and used cars), the number of enterprises participating in this market is quite large, at over 500 enterprises. Although the concentration level in this field is quite high, the level of competition in the market is also high because domestically manufactured cars have to compete directly with a similar type of imported auto.

Under the Law on Competition, an enterprise is deemed to hold a dominant market position when it has significant market power or has 30 per cent or more of the market share in the relevant market. Within a highly concentrated market as automotive, the enterprises with dominant position need to employ an effective compliance programme to guarantee that they are not by chance breach the regulations of “abuse of dominant market position” as prescribed in the competition law.

In order to increase market power, many players in the automotive market may plan to engage in economic concentration, mainly in the form of joint ventures. This is an ideal way to effectively participate in the regional and global value chain of automotive production.

This March, TC MOTOR of Thanh Cong Group and Hyundai Motor Group officially entered into a joint venture to distribute Hyundai-branded passenger cars in the Vietnamese market. This joint venture promises to introduce new, high-tech products that are most suitable for the domestic market, and also aims to penetrate other regional markets.

As the concentration level of the automotive industry is relatively high, it is likely that the economic concentration in this sector would be scrutinised carefully by the competition authority if the notification thresholds prescribed in the Law on Competition are met. Having said that, joint ventures generally bring many positive impacts on development of the automotive industry that would be taken into account by the competition authority. The positive factors would be considered on the perspectives of competition law in term of assessing economic concentration includes three points.

First is whether or not the economic concentration will promote economic efficiency in terms of size and resources of the locality, industry, sector, and society, in coordination with the objectives set out in the government’s or prime minister’s approved strategy and planning for the development of industries and sectors.

Next would be the level of application of scientific advances and technological improvements by the enterprise after the economic concentration in order to improve productivity, quality, and business efficiency in order to reduce costs, improve the quality of products and services, or otherwise serve the interests of consumers and the community.

Finally, whether or not the enterprise after the economic concentration strengthened the competitiveness of Vietnamese enterprises in the international market would be assessed on the basis of the positive consequences of the economic concentration in expanding the scale of production, domestic consumption, and export of goods or services.

VIR

Auto imports from China surge in Jan-Apr

May 17, 2021 by english.thesaigontimes.vn

Auto imports from China surge in Jan-Apr

By Le Hoang

Auto imports from China. CBU car imports from China surged in the January-April period this year – PHOTO: VNA

HCMC – Vietnam spent US$247 million importing more than 6,600 completely-built-up (CBU) cars from China in the first four months of the year, soaring 480% over the same period last year, according to the General Department of Vietnam Customs.

In the four-month period, the country bought nearly 50,200 autos worth a total of US$1.12 billion, jumping 56.5% in volume and 58.2% in value.

Of the total, there were some 33,400 cars with fewer than nine seats and nearly 12,000 trucks.

Thailand continued to be Vietnam’s largest supplier of autos with 25,700 units, valued at US$474.8 million, followed by Indonesia with 13,900 units worth US$172.8 million.

The number of auto imports from Thailand, Indonesia and China accounted for up to 92.2% of Vietnam’s total car imports in the four-month period.

In April alone, nearly 14,900 CBU autos, valued at US$310 million, were shipped to Vietnam, mainly from Thailand, Indonesia and China. The number of autos imported from these three markets accounted for 94% of the country’s total car imports last month.

Of the total, over 10,300 under-nine-seat cars worth US$156 million underwent customs clearance procedures, making up 69.4% of the total number of CBU car imports to Vietnam in April and down 4.7% in volume month-on-month.

Moreover, 29 vehicles with more than nine seats, 2,500 trucks and 1,980 special-use vehicles were delivered to Vietnam.

Among the special-use vehicles, nearly 1,700 units, or 84%, were imported from China through a border gate in Lang Son Province.

Vietnam posts US$530 million of trade surplus in auto accessories in Jan-Apr

May 24, 2021 by english.thesaigontimes.vn

Vietnam posts US$530 million of trade surplus in auto accessories in Jan-Apr

By Hung Le

A man works at an automotive assembly plant – PHOTO: HUNG LE

HCMC – Vietnam’s imports and exports of auto parts and accessories in the first four months of 2021 were US$1.67 billion and US$2.2 billion, respectively, leading to a trade surplus of some US$530 million.

Data of the General Department of Vietnam Customs showed that the country’s imports of auto parts and accessories from January to April rose 44.8% year-on-year to US$1.67 billion. In April alone, Vietnam imported US$452 million of these products, declining 8% month-on-month.

On the other hand, exports of auto parts and accessories in the first four months reached US$2.2 billion, rising 30% compared with the same period last year. Vietnam’s biggest importers were countries with developed automobile industries such as Japan, the United States, South Korea and Thailand.

The surging exports of auto parts and accessories were better than expected as many automakers in Vietnam have complained that the underdeveloped supporting industries in the country have reduced the competency of locally made autos against imported completely-built-up (CBU) ones.

The local input materials and components for coaches in Vietnam account for only 10-15% of the entire products, while that of Indonesia and Thailand amount to over 70%. According to automakers, the low localization rate has increased the prices of domestically made autos 15-20% higher than that of CBU autos imported from other Southeast Asian countries.

Some market observers said the country’s achievements in the production and export of auto parts and accessories mainly rely on foreign invested companies, especially those from Japan and Taiwan such as Furukawa, Okaya, Nagata, Sanyo Seisakusho, Pronics, Cobal Yamada, MTEX, FAPV, Nissei and Nidec Tosok.

These companies have invested in export processing zones in HCMC such as Tan Thuan and Linh Trung, from where they export their products to other markets around the world.

Vietnam has also attracted manufacturers from Germany and South Korea. For example, Bosch Powertrain Solutions’ factory in the southern province of Dong Nai is producing continuously variable transmission push belts for automakers in the Asia-Pacific and North America.

In 2020, Vietnam imported US$4.2 billion of auto parts and accessories and exported over US$5.6 billion of these products.

Some automakers said the country’s advantages include the high-quality human resources and low labor costs. However, the production of auto parts and accessories still relies on imported raw materials.