Vietnam’s auto manufacturers and assemblers have proposed the Government reduce import duty on auto parts so that they can sell cars at more competitive prices than those of completely-built-up vehicles imported from regional countries.
Sumito Ishii, managing director of General Motors Vietnam Corporation, said at the mid-term Vietnam Business Forum 2017 in Hanoi last Thursday that local automakers are at a disadvantage when competing with overseas manufacturers.
Local manufacturers, he said, have to bear various expenses such as packaging, logistics and import tariffs, which make locally-assembled products less competitive than imported vehicles. The cost gap can expand to between 10% and 20% when the auto import tariff is slashed to zero early next year, he said.
Pham Van Tai, deputy general director of Truong Hai Auto Corporation (Thaco), proposed the Government cut the import duty by 15-20% on completely knocked down (CKD) components that have not been manufactured locally. Besides, low tariffs should be given to components that are manufactured locally to support the domestic manufacturing sector and create jobs for more than 120,000 workers.
In addition, special consumption tax on localized components should be exempted to help reduce selling prices of autos in Vietnam. The Government also needs to take measures against trade fraud, closely control the origin of autos imported from ASEAN, and create an environment for fair competition.
According to the General Statistics Office, in the year to June 15, Vietnam had spent over US$950 million importing 46,800 autos, up by 2,000 units year-on-year. Of this volume, cars of less than nine seats accounted for more than 50% with 25,000 units, followed by 17,500 trucks worth US$347 million and 327 cars of more than nine seats worth US$9.3 million.
Pre-tax costs of under-nine-seat cars, passenger cars and trucks were over VND375 million, VND600 million and VND450 million each respectively, or VND20-50 million lower than the same period last year.
Meanwhile, the expenditure of automotive component imports for domestic assembly was US$1.5 billion from early this year to date. Vietnam spent a total of US$2.4 billion buying autos and auto parts including complete engines from Japan, South Korea and China, and other peripherals from Thailand, Indonesia and Malaysia.
Economic experts said the increase in CBU auto and auto part imports may cut into the competitiveness of Vietnam.
Local auto manufacturers and assemblers had earlier been expected to reach the localization rate of 40% in 2005 and 60% in 2010. However, the rate currently hovers around 7-10%. Thaco has the local content ratio of 15-18%, while Toyota Vietnam has a ratio of 37% for its popular make of Innova.
Deputy Minister of Industry and Trade Tran Quoc Khanh said the ministry will hold dialogues with auto manufacturers and assemblers to discuss solutions to guarantee fair competition.