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3 OVERALL ASSESSMENT OF STATE’S REGULATIONS ON THE DEVELOPMENT OF VIETNAM’S AUTOMOBILE INDUSTRY
With such achievements, we can say the achievements of the automotive
industry of Vietnam in recent years are too small compared with the
proposed strategies and actual needs.
The government has launched various preferential policies and they have
been applied in recent years to help the automobile industry Vietnam
leapfrog to catch up with the world. But in reality, the people of Vietnam
have not been enjoyed anything from these policies and goal of leapfrog of
the automotive industry did not come true even though the time
implementing the strategy has lasted over 10 years.
Some shortcomings of the automobile industry in recent years are as
For price: there have not been low price vehicles to meet the needs of
people in Vietnam which have income much lower than average income of
people in the region. Current, in China, Korea, Thailand, the Philippines,
car price of a medium class is about 2000 to 20,000 dollars, whereas in
Vietnam, car price of a medium class is about U.S. $ 25,000-30,000.
After nearly 15 years of the automotive industry and more than 10 years of
integration, car prices tend to rise more and more. In some time, when
demand is higher than supply, shortage of goods occurred and the buyer
must bear a higher price and must wait for a long time to receive their cars.
For market: Target to meet the market demand is not met. Number of cars
per capita in Vietnam is only at 8 vehicles/1,000 people. This level,
compared with China (24 vehicles/1,000 people), Thailand (152
vehicles/1,000 people), Korea (228 vehicles/1,000 people), is too low.
For export: Currently, there is no car manufactured by a joint venture
enterprise in Vietnam or by domestic automobile company exported to
foreign markets. In the near future, export is still not very good because
EURO II emission standard has not yet been applied for cars manufactured
in Vietnam, whereas, in advanced countries, this standard was not applied
To develop supporting industries, localization rate was given in each
timeline and each type of cars in detailed but not achieved. Currently, the
localization rate in automobile enterprises is only at 20%. Actually, raising
the localization rate of 50-80% as oriented by the government is very
difficult because even in their main factories they only produce about 45%
of total number of details.
3.3.3 Reasons for shortcomings
For management tool: Underdevelopment status of Vietnam’s automobile
industry is resulted from many different causes. One of major causes for
that is Vietnam government has not had an effective regulatory tool. The
government has regulated the industry with a single tool in more than 10
past years. It is tax. Whereas, we ignored many other factors such as new
technology, quality control, etc.
Role of management: Apparently, the managers are only interested in sales
achieved without paying attention to the source of the problem. The
automobile industry got 80,000 units in late 2007, import turnover of spare
parts reached $ 700 million. According to the Ministry of Industry and
Trade, they are just flashy numbers.
For automobile manufacture technology: Joint venture and domestic
enterprises have not really focused on automotive technology, they still
insist on profit. Automobile industry of our country just specializes in
assembling and processing. For instance, in Toyota joint venture, the
manufacturer with the highest localization rate, car bodies are stamped in
Vietnam, whereas other companies just complete electrostatic coating step.
With low localization rate and with purpose for quick profit, the profits
actually reach only 3% to 5%.
In fact, manufacturers of cars in the world still do not consider Vietnam as
a potential market for automobiles. Therefore, they do not strongly invest
in technology and do not assemble top brand vehicles in Vietnam. The main
reason is people's low income with average income per capita lower than $
1,000/person/year. In addition, the proportion of car use is very low. For
instance, in Ho Chi Minh City, where number of people using cars is
highest, the proportion of car use is only 47 vehicles/1,000 people.
Automobile industry requires big investment and long recovery of capital.
According to statistics, a car composes of 20,000-30,000 details with high
technology, big R & D cost and huge capital investment. Besides, the life
cycle of each brand is only in the range of 5-7 years. Therefore, many big
car makers in the world do not want to invest large amount of capital and
technology into Vietnam's market.
Import tax of neighboring countries of Vietnam is very low, creating a
significant competition for cars made in Vietnam. Import tax of cars is only
under 20% in Cambodia and 42% in Laos.
Scale of Vietnam’s automobile industry now is not commensurate with
development potential. Vietnamese people have to buy a car with a high
price and localization rate is low due to underdevelopment status of
supporting industries. The reason for all above issues is poor management
capacity. Currently, the only management tool is tax; the only efficiency
evaluation method is through turnover.
RECOMMENDATIONS FOR IMPROVING STATE’S
ON THE DEVELOPMENT OF VIETNAM’S AUTOMOBILE
INDUSTRY FOR THE PERIOD 2011 – 2020
FORECASTING THE TREND OF DEVELOPMENT OF
VIETNAM’S AUTOMOBILE INDUSTRY IN THE PERIOD
Three main trend for global:
In general, development of global automobile industry has 03 main trends:
1. Development of automobile industry relies on internal force (i.e., its own
technology). These nations have their own brand name cars, including nations
with high technology level such as Germany, USA, Japan and Italy and later on,
Korea, French, Sweden.
2. Development of automobile industry by establishing joint venture companies
with foreign big car makers from developed countries, then turning them into
100% domestic-owned enterprises by buying them. China is an example.
Currently, SATC Motor bought Rover 750 and 250 from MG Rover in 2005,
Geely Auto and Chongqing Changan Auto are interested in Volvo…
3. Development of automobile industry by developing supporting industries
through establishing joint venture companies. Countries representing this trend
are Thailand and Taiwan (nations with medium technology level). Thailand has
about 700 automobile component manufacturers and 1000 supporting
manufacturers. Taiwan also has more than 2000 spare part manufacturers.
Based on above analysis, some comments are made as follows:
- Vietnam’s technology level is still low. Therefore, it is impossible for
Vietnam to build its automobile industry by itself.
- Domestic companies major in automobile assembly only.
- Vietnam can do the same way China did with support from the
government. However, there has not been any policy for this till now.
So, it can be said that buying brand names and manufacturing
technology from some big car makers is impossible at this time and
in near future.
- Development of supporting industries is not as good as expected.
With protection policy, the government expected joint venture
enterprises to create more jobs, increase localization rate and lower
the prices. In fact, joint venture companies did not keep their
commitment to get localization rate of 30-40% in 10 years.
Currently, localization rate in products manufactured by joint venture
companies gets only 2-12%. Supporting industries in Vietnam
provide just simple and low valuable products for car manufacturing
process such as tire, tube, battery, electric wire, car chair, etc.
In general, there is no clear orientation from the government for the
development of Vietnam’s automobile industry.
4.1.2 Development orientation by Government in other country for
development of automobile industry.
To forecast the trend of development of Vietnam’s automobile industry for
the period of 2011-2020, taking a look at neighboring countries and at
Vietnam itself will be essential:
From 1985, Malaysia government promulgated a policy to protect home
manufactured cars with an ambition to take control of the automobile
However, domestic cars in Malaysia can only be consumed in domestic
market with a falling market share. Future of Malaysia’s car makers are
foreseen to be bankrupted or merged with a big car maker. Effectiveness of
the protection policy can be seen clearly.
Recently, Malaysian government decided to remove protection policy,
creating a market with higher competition. Inhabitants benefit from this
Thailand is now considered as “Detroit of Asia”, as a center providing cars
and accessories to many big car makers all over the world.
Thailand did not do the same way as Malaysia or Vietnam did. Until now,
Thailand has not have its own brand name cars but it has established 700
car component manufacturers and 1000 auxiliary manufacturers.
It can be said that Thailand is in the right direction in developing
automobile industry by participating in global production chain, attaching
special importance to a specific product, not developing domesticmanufactured cars at all costs.