Industry Ministry admits failure in developing auto industry. So what's next?
The Ministry of Industry and Trade (MOIT) has admitted that the plan to develop an automobile industry of Vietnam has failed, but it still insists on protecting domestic assembling enterprises which work for foreign invested enterprises.
MOIT said the car selling price is twice as much as the price in other regional countries, while the locally made content ratio is still lower than the targeted level.
The localization ratio, according to Nguyen Khac Trai from the Hanoi University of Technology, is just 5-7 percent.
Tran Huu Nhan from the HCMC University of Technology believes the reason behind the failure of the automobile industry development was inconsistent policy.
When developing automobile industry, state agencies needed to calculate the output and foresee market consumption. Meanwhile, the Vietnamese market is small with many product lines.
“Our policies cannot settle the problems to the every root,” he said. “Vietnam needs to have new thinking in developing the automobile industry.”
Vietnam should not try to undertake all steps of the automobile manufacturing process. It would be better to focus on certain links in the process.
“Instead of trying to create a product bearing Vietnamese brand, Vietnam should only get involved in some links of the value chain,” he said. “If Vietnam still insists on making cars from A to Z, it will never catch up with developed countries."
While many analysts criticize foreign-invested automobile enterprises for breaking commitments on gradually increasing the localization ratios and helping develop the Vietnam’s automobile industry, MOIT still intends to continue giving investment incentives to enterprises.
At a meeting with automobile enterprises in February 2017, MOIT put forward three solutions to develop the automobile industry in the time to come.
First, creating a market for domestic automobile manufacturers and protecting the market in a reasonable way. Second, supporting manufacturers to cut production costs and improve competitiveness. Third, developing supporting industries.
Nhan commented that protecting and giving incentives to domestic automobile manufacturers is not a good choice for now.
Elaborating on this, he said though the policies may benefit enterprises, no breakthrough would be made in the automobile industry if the products are not welcomed.
“The policies on local production protection and enterprise support are not likely to bring high efficiency to the industry,” he said.
Meanwhile, Trai from the Hanoi University of Technology, said only when the economy develops with better human resources will the automobile industry develop.
“In the current conditions of Vietnam, we cannot have an automobile industry. I think it will only form in 20 years,” he said.
Thanh Mai, VNN