Automobile industry development plan of Vietnam
AsemconnectVietnam - Development of the auto industry must be in line with approved master plan on the country’s industry and development strategies of concerning sectors, so as to mobilize full resources of all economic sectors, with State owned enterprises acting as key players.
I. Development viewpoint
- The automobile industry is a crucial sector, which should be given a priority for development in a bid to help serve the industrialization, modernization and development of national security and defense capacities.
- To rapidly develop the market-based automobile industry and integrate with the world economy; to take appropriate development steps and encourage specialization and cooperation to make best use of the country’s advantages and potentialities; and meanwhile to actively get involved in the process of labor distribution and international cooperation in the automobile industry.
- Development of the auto industry must be in line with approved master plan on the country’s industry and development strategies of concerning sectors, so as to mobilize and bring into full play resources of all economic sectors, with state enterprises acting as key players.
- The auto industry shall develop on the basis of using the world advanced technologies, combined with stepping up development research activities at home and utilizing existing infrastructure and facilities, with a view to meeting domestic demands for common use vehicles with competitive prices, giving fresh impetus to the development of domestic supporting industries in order to speed up domestic manufacture of auto components and spare parts.
II. Goal & objectives
1. Overall goal
The auto industry of Vietnam is projected to develop into a crucial industry, which is able to fully satisfy domestic demands and to enter regional and international markets by 2020.
2. Specific objectives
- For common use vehicles (trucks, buses and cars): by 2015 and 2020, to meet around 40 to 50% and 80% of the domestic market demand in terms of volume, respectively, while the ratio of local content is expected at 40% and 50%. Domestically manufactured engines and gearboxes are projected to account for 50% and 90%, respectively by 2020.
- For special use vehicles: by 2015 and 2020, to meet 30% and 60% of the domestic market demand respectively in terms of quantity, while the ratio of local content is seen at 40% and 60%.
- For high class vehicles:
For high-class tourist vehicles, the ratio of local content is expected at 20-25% by 2015 and 40-45% by 2020 to satisfy most of the domestic market demand.
For trucks and buses, the ratio of local content is seen at 20% in 2015 before expanding to 35-40% in 2020, meeting 80% of the domestic market demand.
- On engines, gearboxes and spare parts: focus shall be made on the manufacture of engines, gearboxes, transmission sets and spare parts in large quantities in service of domestic assembly and export.
- On export: exports of autos and related parts are projected to represent 5 to 10% of total production value of the industry by 2020, and to gradually increase in subsequent periods.
III. Orientation by 2020
On common use vehicles, including trucks (mostly small- and medium-sized vehicles), buses, and 4-9 seat cars.
- Passenger vehicles: for transport of passengers, including vehicles of 10 seats or more with projected output:
15,000 vehicles in 2015, meeting above 50% of the domestic demand
36,000 vehicles in 2020, meeting over 80% of the domestic demand
The ratio of local content is expected at 40% in 2015 and 60% in 2020, with the rate of domestically manufactured engines being 15-20% and 50% respectively.
- Trucks: for carriage of goods, in service of mining, industrial engineering and construction, including small- and medium-sized vehicles (up to 20 tons). Projected truck output:
By 2015: 68,000 vehicles, meeting above 50% of the domestic demand
By 2020: 127,000 vehicles, meeting around 80% of the domestic demand
The ratio of local content is expected at 40% in 2015 and more than 60% in 2020.
- 4-9 seat cars are vehicles with structures similar to those that are manufactured by foreign invested enterprises (minibuses and coaches etc.) but with simpler forms and facilities and prices affordable to domestic consumers. Projected domestic output of 4-9 seat cars:
By 2015: 3,000 vehicles, meeting around 10% of the domestic demand
By 2020: 10,000 vehicles, meeting around 15% of the domestic demand
Most of the domestic demand will be satisfied, inclusive of an output of 9 seat cars manufactured and assembled by foreign invested enterprises.
The ratio of local content of common use vehicles is expected at 30% in 2015 before increasing to more than 50% in 2020.
- Special purpose vehicles: Building on imported or home-made auto chassis, to organize manufacture of special purpose vehicles, including refrigerator cars, fire engines, road sweepers, mud dredgers, concrete mixers, crane trucks, electric repair vehicles, ambulances, drillers, and excavators etc. to cater to domestic needs. Projected output of special purpose vehicles:
By 2015: 2,000 vehicles, meeting around 30% of the domestic demand
By 2020: 6,000 vehicles, meeting above 60% of the domestic demand
The ratio of local content in special purpose vehicles is expected at 40% in 2015 and 60% in 2020.
- High-class vehicles:
Output of cars, including 6-9 seat vehicles manufactured by foreign invested enterprises, is projected at 32,000 vehicles in 2015 and 60,000 vehicles in 2020. Of these, the ratio of local content is expected at 20-25% in 2015 and 40-45% in 2020.
¨ Manufacture of auto engines, gearboxes and transmission clusters
- Auto engines (mostly diesel engines with a capacity of 80 to 400 horse power): 100,000 engines per year by 2015 and around 200,000 engines by 2020, of which engines of 100 to 300 HP account for 70%. The ratio of local content is expected at 15-20% by 2015 and 50% by 2020. The foreign invested sector is encouraged to manufacture car engines.
- Gearboxes: Annual production of gearboxes is projected at 100,000 sets by 2015 before increasing to 200,000 by 2020, while the ratio of local content is seen at 90% by 2020.
- Transmission clusters: yearly output of transmission clusters is projected at 100,000 sets by 2015 and around 200,000 sets by 2020, while the ratio of local content is expected at 90% by 2020.
IV. Investment orientation and requirements for investment projects
- To encourage the allocation of projects for auto manufacture and assembly and production of spare parts in the three key economic regions and the nearby areas in order to make full use of available sources, including:
Northern Vietnam: provinces and cities locating in and adjacent to the economic growth triangle of Hanoi, Hai Phong and Quang Ninh.
Central Vietnam: provinces from Thanh Hoa to Khanh Hoa.
Southern Vietnam: provinces and cities lying in and being bounded by the Hochiminh City - Ba Ria Vung Tau - Dong Nai - Binh Duong economic growth quadrangle and Can Tho City (in service of the Mekong River Delta).
- To assign state enterprises, including Vietnam Motors Industry Corporation (VINAMOTOR), Vietnam Engine and Agricultural Machinery Corporation (VEAM), Vietnam Coal Corporation (Vinacoal ) and Sai Gon Automotive Mechanical Transport Corporation (SAMCO) to act as key players in the industrial sector; prepare and carry out projects investing in the manufacture and assembly of autos and related parts in the following direction:
The VINAMOTOR shall specialize in manufacturing and assembling buses, small- and medium-sized trucks, cars, engines, gearboxes and transmission clusters.
The VEAM shall specialize in manufacturing and assembling buses, small- and medium-sized trucks, cars, engines and transmission clusters.
The VINACOAL shall specialize in manufacturing and assembling medium- and large-sized lorries, special-purpose vehicles and working accessories.
The SAMCO shall specialize in manufacturing and assembling buses, special-purpose vehicles and a number of auto parts.
- To assign the Ministry of Defense and the Ministry of Public Security to arrange the manufacture and assembly of special purpose vehicles in line with the requirements of defense and security.
- Eligibility for the above-mentioned state enterprises and auto enterprises under the management of the Ministry of Defense and the Ministry of Public Security:
- Investment projects must meet standards set for auto manufacturing and assembling enterprises.
- New investment projects must meet the requirements of high specialization assignment and cooperation in conformity with the production assignment orientation set out in Clause 4; have advanced technology transferred from foreign auto giants; and the ratio of local content higher than given level.
- Investment projects must be verified and reviewed according to current regulations on investment and construction management.
- For foreign invested enterprises, investment in production expansion is to be carried out subject to investment permits. To encourage investment in the manufacture of engines and spare parts on the basis of transfer of advanced technology from the world well-known auto firms.
- For other domestic enterprises:
- Projects must be in conformity with the strategy and plan for Vietnam’s auto industry development to 2020.
- To meet standards for auto manufacturing and assembling enterprises.
- To encourage projects for production of exportable goods, manufacture of auto engines, gearboxes and transmission clusters as well as large-scale projects.
- For enterprises that have manufactured and assembled autos and manufactured auto parts for a period of time, investment in the expansion of production capacity must be combined with technology improvement and equipment modernization in order to raise the rate of local content according to orientation set out in Clause 3.
- For new investment projects, to fulfill conditions, including having advanced production technology transferred from the world’s auto manufacturers, having plans, timetable and specific measures to implement targets of local content (according to orientations set out in Items a, b, c and d of Clause 3); having specific and feasible production technology and solutions to ensure that products meet standards of technique, quality, safety, registry, and environment prescribed by the State; fully complying with regulations on industrial property and copyright.
V. Investment funding sources
Total investment capital requirements are projected as follows:
VND 35,000 to 40,000 billion in the period 2015-2020. Funding sources comprise of:
- Funds raised from enterprises;
- Commercial bank loans;
- Foreign investment capital;
- State credit lines for development investment (destined only for major projects determined by the Prime Minister and projects eligible for borrowing state development investment credit capital according to current provisions).
VI. Policies and measures to support the auto industry
1. Tax policies on autos, related components and parts
To encourage the development of auto and related parts manufacturing industry for domestic use and exports, the State shall introduce supporting policies as follows:
- To impose zero tariffs on CKD and IKD kits and tariffs on imported auto components and spare parts according to the tariff schedule and in the direction of promoting domestic manufacture.
- Products manufactured on a trial basis for one year shall be exempt from corporate income tax from the time when products are sold in the market.
2. Market-related policies and measures
+ Market protection
- To take measures to support domestic manufacture in line with the country’s integration with regional and international economies.
- To take measures to support domestic manufacture in line with the country’s integration with regional and international economies.
- To introduce technical standards for autos and related parts in an attempt to prevent the circulation of inferior and unsafe goods that cause environment pollution.
- To strictly deal with smuggled goods and goods obtained by fraud and brought into Vietnam.
+ Market expansion
- To enhance investment in upgrading the national road traffic system;
- To encourage auto manufacturing and assembling enterprises to use homemade engines and auto parts;
- To facilitate enterprises’ marketing and trade promotion activities aimed to expand their domestic market shares and to make inroads into foreign markets.
3. Investment-related policies and measures
- To encourage cooperation and allocation of production among domestic enterprises and between domestic enterprises and foreign invested enterprises in order to make best use of the invested technologies and equipments, reduce new investment costs and avoid overlapping investments.
- To gradually make new, focus and fast investments in the fields of basic technology, product quality determination in line with the market demand.
- Foreign-invested projects in supporting industries, manufacture of auto engines, related components and parts, especially investment projects with a large scale and high-quality products for serving programs for raising the rate of local content and export shall be eligible to enjoy incentives according to Law on Foreign Investment in Vietnam.
4. Policies and solutions on science and technology
- To encourage technology transfer and investment in advanced technologies in service of programs for manufacturing autos and related parts, particularly engines, gearboxes and transmission clusters.
- The State shall provide financial support to investment in development researches in the auto industry.
5. Policies and solutions regarding human resource
To speed up investment in training and re-training managerial staff, designers and skilled workers for the auto industry, as well as sending them overseas for training by using state funding.
6. Policies and solutions regarding capital mobilization
- To encourage equitization of auto and related parts enterprises, including sale of equities to foreigners in order to raise new investment capital and diversify funding sources.
- To encourage all economic sectors to invest in the manufacture of autos and related components and parts.
- Enterprises, which are established according to law and have projects meeting all requirements set out in Clause 4 (Part “For other domestic projects”), shall be entitled to invest in projects on the principle of self-responsibility for investment efficiency. While preparing a project, the investor shall, based on the afore-mentioned planned directions, particularly the market demand and the requirements of additional production of each type of vehicles for a certain period, guidelines on the distribution of production forces, and enterprises’ real competitiveness to determine appropriate investment scales and locations, as well as be responsible for his or her decision.
7. Policies and solutions on industry sector management
- To concentrate on researches and perform solutions to regulate supply and demand in the domestic auto market, aiming to ensure the healthy and efficient competitiveness for the whole sector.
- To draw up and perfect the legal framework in order to create favorable conditions for enterprises to arrange, re-organize and set up large-scale enterprises on their own on the model of parent - subsidiary company, and satellite companies of large enterprises in the auto manufacture and assembly; to accomplish the task of specialization and cooperation.
VII. Implementation organization
1. The Ministry of Trade and Industry
- To formulate and issue standards for auto manufacturing and assembling enterprises.
- To direct the implementation of programs and solutions to expand auto production by 2020.
- To assume the prime responsibility for verifying new investment projects for auto manufacture and assembly using state capital at the four above-mentioned state enterprises, and submit them to the Prime Minister for approval.
- To collaborate with concerning ministries and sectors in conducting inspection over projects for auto manufacture and assembly and manufacture of auto parts according to the contents of projects.
- To approve inspection work according to the functions of sector management, and recommend to the Government measures to regulate supply and demand in the auto market in the course of plan implementation; to inform enterprises for implementation.
- To assume the prime responsibility and collaborate with concerning ministries and sectors in studying and taking measures to enhance the efficiency of market management, combat against auto and related parts smuggling and trade frauds with a view to safeguarding domestic market.
- To propose solutions to accelerate export promotion activities and facilitate Vietnam’s auto industry to enter regional and international markets.
2. The Ministry of Science & Technology
- To draw up and issue regulations on methods of calculating the ratio of local content as a basis for determining subsidies granted to enterprises manufacturing and assembling autos and related parts.
- To assume the prime responsibility and work with relevant ministries and sectors in promulgating technical standards and quality standards for auto and related parts of types of domestically circulated vehicles; technical barrier regulations in order prevent the production, assembly and circulation of low-grade and environment polluting autos.
- To provide guidance on the transfer and acceptance of technology to enterprises manufacturing and assembling autos and related parts to ensure that the transferred technologies are indeed advanced.
3. The Ministry of Finance
- To impose import tariffs on auto components and parts instead of tax calculation according CKD and IKD kits in line with the regional and international economic integration process.
- To study and submit to the Prime Minister for introducing mechanisms to encourage projects for manufacture of auto engines, gearboxes and transmission clusters.
- To study and submit to the Prime Minister for introducing policies to provide financial support to development research activities and to training human resource for the auto industry.
- To assume the prime responsibility and coordinate with relevant ministries and sectors in studying and submit to the Government for providing for some fees in a bid to prevent purchase and circulation of individual tourist cars as the road traffic system fails to catch with the growth in traffic vehicle numbers.
- To tightly control the collection of tariffs on imported autos and related parts; to work with the Ministry of Trade in intensifying fight against smuggling and trade frauds.
4. The Ministry of Transport
- To review, perfect and promulgate new regulations on standards, technical and safety conditions for imported autos (regulations on registry of motor vehicles) in the direction of improving auto quality and safety in replacement for inappropriate current regulations.
5. The Ministry of Planning and Investment
- To actively call for and attract foreign investment in development of the auto industry in line with the approved strategy and planning, especially in the manufacture of auto parts and components. To control and provide support to foreign-invested enterprises in the manufacture and assembly of autos and related parts in conformity with licenses and current legal provisions.
6. The Ministry of Public Security
- To assume prime responsibility and collaborate with the Ministry of Transport and the People’s Committees of provinces and centrally run cities in studying and prescribing the limit on the number of newly registered autos per annum in each locality in line with the local plan on transport development, urban planning, local road traffic situations (both dynamic and static) and actual demand for additional production and renewal of traffic vehicles.
7. The People’s Committees of provinces and centrally run cities
- To create favorable conditions for the implementation of projects for auto manufacture and assembly and manufacture of auto parts in provinces and cities (if any) and supervise the performance of projects according to the prepared and registered contents.
- To work with ministries and sectors in conducting control and supervision of the performance of planning in order to ensure the synchronism and uniformity between the auto industry development plan and the local master plan for socio-economic development and the local industrial development planning.
- To direct functional departments, branches and sectors to collaborate in reviewing the work of business registration for enterprises engaged in auto manufacture and assembly. To direct the Departments of Industry to submit periodic reports to the Ministry of Industry on the performance of projects for auto manufacture and assembly.
8. Vietnam Association of Mechanical Enterprises, Vietnam Association of Auto Manufacturers, and Vietnam Association of Automobile Engineers
- To study, propose and arrange the coordination among mechanical enterprises engaged in auto manufacture and assembly and manufacture of auto parts in order to raise cooperation, integration and specialization in the fields of manufacture and assembly of autos and related parts.
- To study and recommend to state management agencies solutions, mechanisms and policies to encourage and promote the development of auto industry in conformity with the ratified strategy and plan.