Because current Vietnamese duties of 60 % will be axed by 2018 for cars imported from within the Association of Southeast Asian Nations, local producers including Toyota, Ford, GM, Suzuki and Mercedes-Benz will have to fight with cheaper imports.
According to the Vietnam Automobile Manufacturers Association, because the country lacks a major parts industry, local car production costs are higher than in other countries of the region due to taxes on imported components.
The government said the domestic auto industry is an important sector, planning to become a “modern industrial country” by 2020. Still, the not so distant protective duties elimination risks swaying automakers.
“Five years is a very short time for makers to enhance competitiveness considering the current auto and supporting industry,” said Yoshihisa Maruta, president of Toyota Motor Vietnam.
Based on sales last year, the top five foreign automakers with plants in Vietnam are Toyota, GM, Ford, Suzuki and Mercedes-Benz, according to figures from the automobile association. Sales of vehicles built in Vietnam jumped 20 percent through the first nine months of this year to 67,045 units, led by Toyota with 23,324 autos.
“If the government doesn’t significantly improve the situation for the local manufacturers, there is always a risk” of some makers shutting plants after 2018, said Michael Behrens, CEO of Mercedes-Benz Vietnam Ltd.
Imported cars will be more affordable than internally produced ones when the tariffs are eliminated unless some other measures are taken, such as cutting taxes on parts that aren’t available in Vietnam.