Putting automobiles at the heart of Vietnam's industry
In 2021, the Government issued Decree No. 101/2021/ND-CP amending and supplementing a number of articles of Decree No. 122/2016/ND-CP dated September 1, 2016 of the Government and Decree No. 57/2020/ND-CP dated May 25, 2020 on Export Tariff Schedule, Preferential Import Tariff Schedule, List of goods and absolute tax rates, mixed tax, import tax outside tariff quota.
Specifically, the Government decided to extend the implementation period of the Tax Incentive Program for domestically manufactured and assembled automobiles until December 31, 2027. This is aimed at encouraging businesses to invest and promote the development of the domestic automobile support industry.
Supporting industry is an important factor promoting the automobile industry in Vietnam. Photo: TMT |
However, in the draft Decree amending and supplementing a number of articles of Decree No. 26/2023/ND-CP on Export Tariff; Preferential Import Tariff; List of goods and absolute tax rates, mixed tax, import tax outside the tariff quota, the Ministry of Finance proposed not to add spare parts and components to the List of Group 98.49 to apply the preferential import tax rate of 0%.
Meanwhile, data from the Ministry of Industry and Trade shows that the Vietnamese automobile industry is importing up to 80% of its components. Currently, there are still not many automobile supporting industry enterprises in Vietnam, only about 300 enterprises of all business sectors. Of these, there are about 40 enterprises manufacturing and assembling automobiles; 45 enterprises manufacturing chassis, bodies, and trunks; 214 enterprises manufacturing automobile components and spare parts... Enterprises in Vietnam have also only produced and processed less than 300 parts.
While the entire car has about 30,000 parts. Besides, the technology content and value of these parts and components are not high.
In Decision 1168/QD-TTg dated July 16, 2014, the Government set the goal of building the Vietnamese automobile industry into an important industry, meeting domestic market demand for vehicles with competitive advantages, participating in exports, and improving competitiveness to participate in the global supply chain.
Regarding market capacity, the Government sets a target that by 2025, the total output of domestically produced and assembled vehicles will reach 466,400 units, accounting for ~70% of domestic demand.
Notably, regarding the development of supporting industries, the Government identifies this as an important industry, playing a supporting role with many other industries, including automobiles.
The government has set a target that in the 2021-2025 period, Vietnam will begin to produce some important parts in the transmission, gearbox, and engine; the domestic production and manufacturing value ratio for vehicles with up to 9 seats will reach 40-45%, and for trucks will reach 45-55%. So far, only two manufacturers, THACO and VinFast, have basically met these criteria.
Solutions to promote supporting industries for the automobile industry
Recently, in the Draft Strategy for the Development of the Vietnamese Automobile Industry to 2030, with a vision to 2045, the Ministry of Industry and Trade also pointed out the problems of the automobile industry. The draft stated that in order to promote the development of the automobile industry, it is necessary to build and develop a supporting industry to supply components and spare parts for the production and assembly of electric vehicles, hybrid vehicles, vehicles using solar energy, using biofuels and other new green fuels...
According to this Draft, the formation of a number of concentrated automobile industrial clusters/centers is based on the organization and rearrangement of production. Strengthening cooperation and association between automobile manufacturing and assembling enterprises, supporting industry enterprises, research and development establishments and training establishments of all economic sectors to improve investment efficiency and enhance specialization.
At the same time, promote large projects on materials industry, especially projects on hot-rolled steel production, fabricated steel... of domestic investors to ensure input material sources for the supporting industry of the automobile industry; Attract investment in basic manufacturing sub-sectors (blank creation, pressure machining, precision machining, heat treatment, surface treatment and mold production for the production of components and spare parts of the automobile industry). Promote cooperation with input material industries for the production of components and spare parts of the automobile industry.
Therefore, promoting the development of the supporting industry is extremely necessary, but Vietnamese enterprises are still not developing commensurate with the market potential. The reasons are that the mechanisms and policies are not strong enough, spread out and lack focus; limitations in human resources and competitiveness of enterprises.
To achieve the above objectives, the Strategy has provided specific directions such as identifying and establishing strategic partners, encouraging investment in projects large enough to create a market for supporting industries; encouraging the production of environmentally friendly vehicles (fuel-efficient vehicles, hybrid vehicles, biofuel vehicles, electric vehicles, etc.), meeting emission standards according to the roadmap approved by the Prime Minister.
The Ministry of Industry and Trade believes that in the coming time, the supporting industry will approach and apply technology to manufacture important parts and components such as transmissions, gearboxes, engines, car bodies, etc. for several types of vehicles; strengthen cooperation with major automobile manufacturers to select types of spare parts and components that Vietnam can produce to take on the role of a link in the global production and supply chain, on that basis, invest in advanced technology and produce for export.
Source: https://congthuong.vn/giai-phap-thuc-day-cong-nghiep-ho-tro-o-to-tai-viet-nam-349302.html
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