How cheap will cars be once tariffs are cut to zero percent?
The tariff cut to zero percent will pave the way for imports from ASEAN to flood Vietnam, but analysts do not think low-cost cars will be available by 2018.
The CBU imports
Meanwhile, Vietnamese manufacturers still nurture the ambition of exporting cars to SE Asian markets.
Under AFTA, the tariff on imports from ASEAN will be cut to zero percent by 2018. Therefore, 2017 is expected to see big changes in the market.
The CBU (complete built unit) imports form ASEAN are on a sharp rise, with Thailand and Indonesia having emerged as the two biggest exporters in the first three months of 2017.
Large foreign automobile manufacturers are not commenting about the changes in their production and business strategies.
According to Ngo Tri Long, a renowned economist, the production cost in Vietnam is higher than other regional countries.
Therefore, it is highly possible that automobile joint ventures would rather import cars for domestic sale instead of making cars domestically.
If this happens, thousands of workers at auto assembly factories would become redundant, while enterprises that provide supporting components may go bankrupt as the market shrinks.
A report from the General Department of Customs (GDC) showed that 14,460 cars were imported to Vietnam from ASEAN in the first three months of the year, an increase of 67.6 percent over the same period last year.
Of the 64,729 cars sold in the first three months of the year by VAMA members, imports from ASEAN accounted for 22.3 percent.
Toyota Vietnam’s list of products includes three import products from ASEAN, namely Fortuner, Yaris and Hilux.
The revenue from the three product lines made up 25 percent of total sales in the first quarter. The two bestsellers of the joint venture were assembled in Vietnam - Vios (4,152 products) and Innova (3,193).
Vietnamese manufacturers plan to export cars
While other auto manufacturers plan to import more cars from SE Asia for domestic sale to enjoy preferential tariffs, Truong Hai and Thanh Cong plan to export assembled-in-Vietnam to SE Asia.
Truong Hai has spent $0.5 billion to build a factory to assemble Mazda cars with the capacity of 100,000 products a year in Chu Lai IZ in Quang Nam province.
In late March, Thanh Cong decided to cooperate with Hyundai to build a complex to make Hyundai products in Vietnam.
Explaining their decisions, Truong Hai and Thanh Cong said they understand that the government is still determined to build an automobile industry in Vietnam.
Tran Thuy, VNN