Automotive Industry In Vietnam - The Need Of Supporting Industries
VLC Industries News - July 201
Automotive Industry In Vietnam:
Viet Nam today is emerging as one of the most potential consumer markets in the world, although the car ownership rate of the Vietnamese people is quite low - only 23 vehicles per 1,000 people, while the equivalent in Thailand is 204 vehicles per 1,000 people, and the minimum in developed countries is 400 vehicles per 1,000 people.
However, with rising incomes, estimated at more than US$3,000 per head by 2021, combined with increasingly improved infrastructure and attractive demographic characteristics, it will be the premise for the Vietnamese automobile market’s purchasing power, which is expected to grow strongly in future.
- 272,750 vehicles were sold, down 10% compared to 2016.
- Segment wise, passenger, commercial, and special-use vehicles decreased by 15%, 2%, and 12% respectively.
- Sales of imported cars grew by 9%.
- Domestically assembled cars decreased by 19%.
Car manufacturers had predicted the decrease in sales, as consumers were waiting for car import tariffs to reduce to 0% in early 2018, in line with the tariff schedules of ASEAN Trade in Goods Agreement.
- In the first five months in 2018, 103,746 vehicles were sold, down 6% compared to the same period last year.
- Segment wise, sales of passenger cars grew by 6% while commercial and special-purpose vehicles declined by 19% and 37% year-on-year respectively
- Sales of imported cars decreased by 46% while domestically assembled vehicles grew by 10% during the same period.
- By the end of 2018, overall sales are predicted to grow by 6.8% year-on-year, including commercial and passenger cars
The 46% decline in sales of imported cars was due to the delay by manufacturers in fulfilling conditions and procedures of Decree No.116/2017/ND-CP (Decree 116), which stipulated conditions on production, assembly, import, warranty, and maintenance of vehicles. In the first two months of 2018, no units were imported into Vietnam.
Post-2018 Growth And Potential
Between now and 2025, the domestic automobile manufacturing industry is predicted to grow by 18.5%, and 13.5% between 2025 and 2035, with output reaching 531,600 units by 2025 and 1.76 million units by 2035. Car sales are predicted to grow 22.6% by 2025, and 18.5%, after 2025. The double-digit growth in production and sales are largely based on the growth in the middle class, GDP, and disposable income. With the current passenger vehicle density in Vietnam at 16 per 1,000 people, which is much lower than Thailand, Malaysia, or Indonesia, there is ample room for growth in the industry
Need for supporting industries
In order to attract investment from domestic and foreign manufacturers, enterprises have proposed to reduce import tax on raw materials for component manufacturers in Vietnam. In the long-term, Vietnamese Government will have mechanisms and policies to attract investment from multinational corporations to invest in large-scale projects in Vietnam. Particular focus is on brands and vehicles that do not have production centers in ASEAN, in order to facilitate the participation of domestic firms in the multinational automobile chain
Vietnam Automotive Industry Highlights
VinFast Manufacturing and Trading Company, a member of property developer Vingroup, partners with global auto part suppliers. The company has allocated 70ha of land to Phase 1 of the project in the north of Hai Phong city for part supplies and supports maximum efforts in infrastructure and implementation procedures. These are the parameters that prove the company will have a large demand for components and spare parts and establish long-term international partnerships.
According to industry representatives, with the vision of large-scale production and international standards, VinFast will have many potential customers. Some suppliers have expressed their desire for a long-term cooperation with VinFast through setting up of component factories in the project complex in Hai Phong