Vietnam’s automobile industry has undergone significant developments in recent years, with an increase in domestic production, assembly, and local procurement rates. However, the industry faces a range of challenges, including fierce competition from imported vehicles, high taxes and fees, and low local procurement rates. This article examines the current state of Vietnam’s automobile industry, highlighting the opportunities and obstacles it faces in a rapidly evolving market.
Domestic Production and Assembly:
In 2022, the number of automobiles assembled in Vietnam reached approximately 755,000 units per year, with 35% produced by FDI firms and 65% by domestic firms. Leading companies like Truong Hai Auto (THACO), Hyundai Thanh Cong Vietnam (HTC), and GELEXIMCO have invested in modern assembly lines and partnerships with international brands to meet the growing demand for vehicles in the Vietnamese market.
Challenges in the Face of Economic Downturn:
Despite the automotive industry’s notable achievements in 2022, the significant macroeconomic effects, both domestically and internationally, are evident in Vietnam. Projections indicate a decline in global GDP growth for 2023, with the Central Institute for Economic Management (CIEM) forecasting reduced GDP growth rates for Vietnam compared to the previous year. The high consumer price index (CPI) is causing consumers to hold off on purchasing luxury goods like automobiles, further exacerbating the industry’s challenges.
Competition from Imported Vehicles:
The automobile market in Vietnam is encountering strong competition from imported vehicles, notably fully assembled vehicles from ASEAN nations like Thailand and Indonesia, as well as in the coming 7-10 years from countries that are members of CPTPP and EVFTA.Barriers persist for the domestic auto industry due to limitations in the size of the local market, challenges in expanding production operations, low rates of local procurement, and elevated vehicle prices.
Government Policies and Support:
The Vietnamese government has set targets for the automobile industry, including aiming to export 90,000 automobiles and $1 billion worth of related parts by 2025. However, achieving these goals will require the implementation of promotional policies in the short, medium, and long term. The government’s “Strategy for the Development of the Vietnamese Automobile Industry by 2025 and Vision to 2035” aims to support the industry’s growth and competitiveness.
Conclusion:
Vietnam’s automobile industry stands at a crossroads, with both opportunities and challenges ahead. While domestic production and assembly have increased, the industry faces significant obstacles, including economic headwinds, competition from imported vehicles, and the need for higher local procurement rates. The government’s support through targeted policies and investment will be crucial in helping the industry navigate these challenges and capitalize on the growing demand for vehicles in the Vietnamese market. As the industry continues to evolve, adapting to changing consumer preferences and technological advancements will be key to its long-term success.
