Monday, November 05, 2007

80,000 cars hit Vietnam’s roads in 2007

The Ministry of Industry and Trade has estimated that the number of locally made cars would hit a record 80,000 units this year.

By the end of September 2007, existing automobile factories in Vietnam had churned out 61,000 units. Of these, 12 automobile joint ventures output 32,000 units, while 47 domestic owned manufacturers made 29,000.

Foreign automobile manufacturers have done well in Vietnam since they hit the market in 1990. 2006 was the only year that witnessed unsatisfactory business results when output decreased by 7,000 units compared to 2005.

In fact, the joint ventures have been making big leaps since 2003: they output 50,636 units in 2003, 54,000 units in 2004, 67,000 units in 2005, and 60,000 units in 2006.

From 1990 to 2006, automobile joint ventures have produced 270,000 units of different kinds and paid nearly $1.5bil towards the state budget both while creating over 50,000 jobs.

When granted investment licenses, foreign automobile joint ventures all committed to gradually increase the localisation ratio of car products. Toyota Vietnam has a localisation ratio of 33% in 2007 for its Innova and it is expected to raise the ratio to 45% by 2008 when it will assemble 19,000 units a year.

Still though, local production proves to be very low and the manufacturers have been facing sharp criticism from policy markers and the public for not fulfilling their localization commitments.

Meanwhile, domestic owned enterprises have made considerable progress in making vans and commercial vehicles. The Vietnam Motor Corporation (Vinamotor), the Vietnam Engine and Agricultural Machinery Corporation (VEAM), Vietnam Coal and Mining Industries (Vinacomin), Truong Hai Automobile Company (Thaco), Xuan Kien Automobile Private Enterprise (Vinaxuki) and Saigon Automobile Corporation (Samco) all have become the members of the Vietnam Automobile Manufacturers (VAMA), which was previously dominated solely by foreign automobile joint ventures.

Vinacomin’s vehicle output is now just enough to serve the demand of the group itself, while its products prove to be competitive when compared to imports thanks to a high localisation ratio and soft prices.