Auto manufacturers expect to get fast lane

in Vietnam
Foreign investment is expected to increase in Vietnams automobile industry in the coming
years as the government explores measures to expand the local market. Vietnam Investment
Review reports.
The Vietnamese government realised that there were barriers to the development of the
automobile industry and is trying to remove them through a long-term master plan. The
purpose is to develop an automobile industry strong enough to compete with other countries
in the region, said Nguyen Thi Xuan Thuy, head of Strategy and Integration Policy Division
under the Industrial Policy and Strategy Institute.
Thuy, who is also a member of the master plans drafting team, said the Vietnamese
government wanted to attract more car foreign investors into the industry by reducing taxes
and fees. Even though the master plan has not yet been approved, it offers a bright outlook
for car-makers.
Kiyoshi Teshima, deputy director of Vina Star Motor a subsidiary of Mitsubishi Motors in
Vietnam, said he hoped the Vietnamese government would maintain stable policies for the car
industry. Tax reductions are also indispensable to motivate customers to buy new cars, said
Teshima.
Over past years, the Vietnamese government has deliberately restricted the growth of the
domestic car market because of chronically bad traffic infrastructure. The policy includes
high taxes and fees imposed on cars, meaning cars in Vietnam are three times more expensive
than other markets.
Vietnams car ownership currently averages at 20 cars per 1,000 people, according to the
Ministry of Industry and Trade.
The difference about the new master plan is that the government will encourage the growth
of the car market, said Thuy, adding that a ratio of 50 cars per 1,000 people in the next ten
years was being targeted. Although the market is still small now, there will be huge
opportunities for car-makers once the new master plan is approved.
Vietnams car industry began in the early 1990s when foreign car makers like Toyota and
Ford started building factories in the country.
Statistics from the Industrial Policy and Strategy Institute showed that there were around 300
domestic and foreign companies operating in the car industry in Vietnam, with Toyota
Vietnam as the biggest player, followed by local firm Truong Hai. However, all of them
operate on a small scale and boast a localisation rate for components of just 10 percent.
Jesus Metelo N. Arias Jr, chairman of Vietnam Automobile Manufacturers Association, in an
interview last month with VIR said that the lack of clear and stable policies had hindered the

development of the car industry in Vietnam.

Arias, also managing director of Ford Vietnam, stressed foreign car-makers and suppliers
would continue to invest in Vietnam but only if the government maintained a stable policy
and reduced business costs.-VNA