Hanoi (VNA) – The Ministry of Industry andTrade (MoIT) will continue pursuing the dream of a real auto industry inVietnam despite the failure of 20 years of efforts towards this goal.

The ministry has set the target to increase thelocal content of cars to 80 percent and turn car production into an important industry in 2025-2035.

Director of the MoIT’s Heavy Industry DepartmentTruong Thanh Hoai said Vietnam’s auto industry has a capacity of producing andassembling around 500,000 cars each year at present, meeting 70 percent of thedomestic car demand. A supporting industry for this sector is taking shape,providing several kinds of car parts such as mirrors, glass, seats, electricwire, battery, tyres, and plastic details.

At the same time, he admitted that the industryfailed to meet the set targets. After 20 years, the local content of cars isjust about 7 – 10 percent at present while the original targets were 40 percentby 2005 and 60 percent by 2010.

Domestically made cars have lower quality andhigher prices compared to imported ones, with production stopping at simple levelfocusing on welding, painting, assembling, and inspection.

The MoIT partly attributed the failure to instablepolicies on taxation, fees and infrastructure for the sector, a lack ofconsensus among state management agencies, and a shortage of concrete actionplans and manpower and financial resources for policy implementation.

Moreover, many foreign carmakers do not want toexpand operations in Vietnam since they already invested in big auto productionprojects in regional countries like Thailand and Indonesia. Buyers’ preferencefor imported cars with advanced functions and better design has also affected thestake of Vietnamese automobiles, according to the ministry.

The MoIT said with a population of almost 100million and growing per capita GDP and middle class, Vietnam has an expandingcar market which posted an average growth rate of nearly 40 percent in the lasttwo years.

Many experts also believed in the potential ofthe domestic market, which no carmakers should miss.

To realise the target for 2025-2035, MoIT DeputyMinister Do Thang Hai said the local auto industry will strive to take part inthe global production chains of existing manufacturers. He said assistance willbe given to businesses with large production volume, and attention will be paidto attracting investment from firms which have yet to run any big productionlines in ASEAN.

The ministry will also encourage the purchase ofmade-in-Vietnam cars and take suitable measures to ensure fair competitionbetween domestically-made and import automobiles.

However, there is doubt about the MoIT’sambition especially when Vietnam will have to cut the import tariff oncompletely built units (CBUs) from ASEAN to zero percent on January 1, 2018 inline with commitments in the ASEAN Free Trade Area (AFTA).

Nguyen Tuan from the Thien Phuc An Co. Ltd pointed outthat Vietnam’s auto industry failed to “grow up” despite many protectionmeasures and incentives over the last 20 years.  He said when the CBU import tax reduces tozero percent, domestically produced cars will not be able to compete withimported autos and the inevitable trend will be increasing the import of CBUs.

Big manufacturers like Toyota and Honda havebeen gradually reducing production activities in Vietnam and instead importcars like Fortuner and Civic to distribute in the domestic market.

Other assembling joint ventures are also facingthe same issue.

Toru Kinoshita, President of Toyota Vietnam andChairman of the Vietnam Automobile Manufacturers’ Association (VAMA), said whenthe tariff cut takes effect, some VAMA members may be unable to compete withimports and thus may cease to exist.

Therefore, State management agencies should providemore support to the car sector, e said.-VNA