Auto manufacturers undecided about becoming either assemblers or importers

Auto manufacturers undecided about becoming either assemblers or importers

Automobile enterprises still cannot decide which business path to follow, either to continue assembling cars in Vietnam or importing cars for domestic sale.

Though it has not had satisfactory business result over many years, Toyota Vietnam has not decided on whether it should continue assembling cars in Vietnam after 2018.

The year 2018 is an important milestone for automobile manufacturers, because the import tariff on imports from ASEAN markets will be cut to zero percent.

Toyota Vietnam’s General Director Yoshihisa Maruta said at a press conference held in Hanoi in early April that the tax cut will put pressure on Toyota and other automobile manufacturers.

He said Toyota Vietnam still has not made up its mind on what it will do in the future, though it must make a decision in 2015.

In general, it takes automobile manufacturers three years to prepare for the manufacturing of one new model.

With the tax cut, it would be cheaper to import cars in complete built unit (CBU) than importing car parts for domestic assembling.

Therefore, some automobile manufacturers are likely to shift to importing cars to sell domestically instead of maintaining their production bases in Vietnam.

Toyota Vietnam cannot make a final decision because they are waiting for the government’s policies on the automobile industry.

In principle, automobile manufacturers would rather continue assembling cars in Vietnam if the government of Vietnam, determined to develop the domestic automobile industry, agrees to give investment incentives.

Toyota Vietnam remains indecisive because it still leads the market in car sales (it sold 41,200 cars in 2014, holding 31 percent of the market share).

But other smaller manufacturers have decided that they will stop production in Vietnam.

Vinastar, a joint venture assembling Mitsubishi cars, for example, has said that it will import Mitsubishi branded cars to sell domestically because the import tariff cut will make imports cheaper.

A senior executive of Vinastar said he has no information about whether the government would change its mind about the automobile industry development strategy.

Suzuki Vietnam has declined to talk about its business plan in the future. However, the manufacturer late last year chose Ertiga, a 7-seat car imported from India as its strategic car model to compete with other rivals.

Hyundai, a well-known South Korean brand which many Vietnamese hoped would invest in Vietnam, has recently said that it will focus on production in Malaysia.

Yoshihisa Maruta from Toyota Vietnam noted that the biggest difficulty for Vietnam’s automobile industry development is low competitiveness, caused by weak supporting industries. It is estimated that only 10-30 percent of car parts can be made in Vietnam.

vietnamnet