The ASEAN-China Free Trade Agreement (ACFTA), effective since Jan. 2010, has bring about more fierce competition to the Vietnamese automobile industry with its Chinese counterparts, reported the Ministry of Planning and Investment ( MPI) on Monday.
Under the ACFTA, China and six ASEAN member countries, including Thailand, Malaysia, Indonesia, the Philippines, Singapore and Brunei can apply a tariff of between 0.1-0.6 percent to automobiles and auto spare parts, while Vietnam, Myanmar, Laos and Cambodia have to wait until 2015 for the similar tariff application.
Although by 2018, imported automobiles to Vietnam will be imposed a tariff of zero percent, the Vietnamese auto industry is now facing with tough competition with the imported auto spare parts, mostly from China, said MPI.
In the context that the complete-built automobiles are limited to enter Vietnam and domestic auto spare parts are less purchased by customers, imported auto spare parts are on the rise in Vietnam.
According to MPI, in the first five months of this year, Vietnam's import value of auto spare parts and accessories reached 72 million U.S. dollars, doubled than that of the complete- built automobiles, and the figure is forecast to rise in the coming years when the tariff is reduced.
Meanwhile, insiders said that with complete production infrastructure and strong support industries, together with attractive policies, some ASEAN countries have become giant " workshops" for the world's leading automobile brands. That disfavors Vietnam's auto industry, particularly from 2018 when the import tariff of complete-built automobiles from ASEAN countries to Vietnam is reduced to zero percent.
They also said that too much changes in automobile-related policies caused great worries to auto manufacturers in Vietnam.
According to the Vietnam Automobile Manufacturers Association ( VAMA), in 2008 the Toyota Vietnam ceased its investment in increasing the number of its most advantaged Innova in Vietnam due to the changes in the especially-consumed tax, which reduced its Innova sale a half. Toyota Vietnam invested only 2-3 million U.S. dollars in its production of spare parts in Vietnam, while it spent 500-700 million U.S. dollars to importing auto spare parts for assembly in the country.
Over the recent three years, auto manufacturers invested about 10 million U.S. dollars in their production, a disappointed amount compared to a bigger figure by investors in Thailand or Indonesia, reported VAMA.
Vietnam, with a population of nearly 88 million as the end of 2011, is a potential market for the auto manufacturers. Currently, Vietnam reaches a rate of 18 vehicles per 1,000 inhabitants. But after 2020 when the country's economy further develops with the income per capita increased and transport infrastructure improved, demands for private automobiles (under 10-seat cars) will surely surge.
According to the Vietnamese Ministry of Industry and Trade (MIT) , Vietnam will have around 166,000 235,000 new vehicles in use by 2015, 347,000 units by 2020 and 836,000 units by 2025. Public buses and trucks will then account for 27 percent of the total vehicles.
If the domestic auto industry does not develop strongly in par with the increasing demand (capable of making under 10-seat cars), by 2025 Vietnam will have to spend 12 billion U.S dollars on importing automobiles, forecasted the MIT.
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