To implement Vietnam’s automobile industry development strategy, Vietnam Motors Industry Corporation (Vinamotor) has concentrated on investing in key projects, including the building of four automobile industrial zones of Dong Vang (in Bac Giang Province), Nguyen Khe (Hanoi City), Van Lam (Hung Yen Province) and Thu Duc (in Ho Chi Minh City).
Vinamotor began assembling light trucks for agricultural purposes in 2003. Then, it produced modern light trucks with an annual output of thousands of units. Transinco-trademarked buses are being operated in all provinces and cities nationwide. Transinco buses have accounted for 80 per cent of the domestic bus market segment.
The Vietnamese automobile industry has made remarkable progress and preparation for international integration. However, with a low starting point and backward technology, Vietnamese cars will encounter serious challenges following Vietnam’s entry to the WTO. Furthermore, the biggest challenge is the weak competitiveness in both quality and price. Local parts suppliers are now able to provide 40 per cent of components but they cannot manufacture high-value components like engine and transmission parts.
The prestige and trademark of the product is also a challenge. Vietnam’s automobile industry has a short history and if it does not have suitable technical solutions, attractive after-sales services and national pride highlights, the market share of Vietnamese carmakers will be threatened. In the automobile market, large carmakers have their own research and development centres with modern experimental equipment enabling them to introduce new models or upgrade versions frequently. This is a way to increase attractiveness to the product. However, this is the shortfall of Vietnamese automakers. In the short term, they cannot reach the levels of international carmakers, especially after the Intellectual Property Law takes effect.
The Vietnamese automobile industry is fledging and has a small consumption market, but there are many producers and assemblers with their own investment policies and strategies, which may have negative impacts on the overall development of the auto industry.
Apart from challenges, Vietnam has rich natural mineral reserves for the development of metallurgy and plastic materials for auto production. Meanwhile, it has low-cost, skilful and creative workforce and has a stable politics.
From potential advantages, the Vietnamese auto industry needs overall solutions for development in the coming years.
First, Vietnam should build national product targets and roadmaps for the development of the auto industry, based on the Prime Minister’s Decision No. 177/2004/QD-TTg dated October 5, 2004, the “Vietnamese auto industry development plan till 2010 and vision to 2020.” This is a general roadmap for the development of the domestic automotive industry. It is also necessary to analyse the importance of the auto industry in the national economy in the 2006-2010 period and in the following years to 2020.
Second, Vietnam needs to expand supporting industries. With the current technologies and capacities, Vietnamese carmakers are only able to make common vehicles and their products are substandard in comparison with those of global firms. To improve their capacity, technology and product quality, domestic carmakers need close cooperation with famous parts suppliers to occupy the domestic market share and penetrate foreign markets. Then, they can scale up production capacity and attract the participation of foreign partners. Besides, Vietnam should focus on the production of items using local materials to sharpen competitiveness on the world market.
Third, Vietnam must ensure sufficient investment capital. At present, auto industry investment is scattered and this is a weak point. Therefore, it is necessary to set up several leading companies to drive the auto industry to compete with outside rivals. Carmakers can also raise investment capital for their projects by issuing bonds and shares.
Fourth, Vietnam needs a better transport system. This is a way to stimulate demand. A good transport system plays a key role in the development of the auto industry. When the roads are good, the transport sector will use more vehicles to carry passengers and commodities, thus, developing the auto industry.
Nguyen Van Khoa, Vinamotor CEO
Vietnamese
