Vietnam’s automotive supporting industries stay behind regional peers

Vietnamese enterprises in the automotive supporting industries are lagging behind regional peers in terms of output and quality, according to Do Thang Hai, deputy minister of Industry and Trade.

Overview of the conference. Source: VGP.

Hai made the statement at a conference discussing the opportunities for local companies participating in the global automotive value chain on November 28.

A report from the Industry Department under the Ministry of Industry and Trade (MoIT) stated the capacity of the local supporting industries has been improved over the past few years, leading to an increase in localization rate in certain types of transport vehicles that are assembled or produced domestically.

For example, light and medium trucks of up to seven tons are those with the highest localization rate at 55% and meet 70% of domestic demand, while passenger buses of more than 10 seats have a localization rate from 20% to 50%, meeting nearly 90% of the local demand.

Most of the world’s major automobile manufacturers are present in Vietnam, including Toyota, Honda, Ford, among others, leading to a number of satellite producers and auto parts suppliers investing in Vietnam.

Such a trend has led to an increase in number of enterprises operating in the automotive supporting industries in the country, the report asserted.

However, for passenger cars of under nine seats, the localization rate is 7 – 10%, much lower than the target of 60% set in 2010, and the average 65 – 70% of countries in ASEAN, and especially in the case of Thailand, it is nearly 80%. 

At the conference, Hai also addressed other shortcomings of the local automotive supporting industries, including the obsolete technologies and equipment, low product quality but at high prices, enterprises’ low capabilities to participate in the domestic automotive production chain.

According to Hai, as Vietnam’s automotive industry lags around 30 years behind neighboring countries such as Thailand, Indonesia and Malaysia and huge challenges remain for Vietnam to catch up with.

He stressed the prerequisite for Vietnam is a well-developed automotive assembling and manufacturing sector, which would open up market for companies in the supporting industries to become suppliers and join the automotive production chain.

Moreover, the automotive industry must continue to integrate in the regional and global value chain, while attracting investment in the sector to enhance competitiveness of local companies.

“There must be close cooperation among government agencies, the business community and related institutions. The MoIT will strive for further development of Vietnam’s supporting industries in the coming time,” said Hai.

The Industry Department suggested each province/city play a more active role in drafting their own policies for the supporting industries.

For the time being, the MoIT is expected to work with the banking sector to provide preferential loans for companies in the supporting industries until 2025.