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Auto industry a promising challenge

Released at: 16:19, 09/04/2015

Auto industry a promising challenge

Mr Arias Jr., Managing Director of Ford Vietnam, tells VET that cost of producing cars in Vietnam is more expensive than in other markets in ASEAN.

by Linh San

What are the biggest challenges to auto manufacturers at this time?

There is no doubt that auto manufacturing is becoming more competitive within ASEAN, and that will only increase as the barriers to trade between the member countries are diminished or removed altogether. This has resulted in mixed perceptions amongst consumers about the future price of vehicles, with many people believing that the removal of tariffs will result in an influx of cheaper imported vehicles. As such, some people are holding off purchasing a vehicle until they see the effects that these changes bring about to pricing.

Another of the other major issues being faced by auto makers is the absence of local support industries in Vietnam that can manufacture the components and parts required to build complete vehicles. Currently, most of the parts have to be imported from other countries, and this can be both costly and inefficient.

These are significant challenges, and will require cooperation between the auto industry and the government in order to be met. We have already seen that the government is willing to be flexible in order to help preserve the sustainability of the industry, and we look forward to their continued support as we grow the auto market in Vietnam.

How would you compare Vietnam's auto market development with other countries in South East Asia?

The Vietnamese auto market is still relatively young compared to other South East Asian countries such as Malaysia, Thailand or Singapore, but it does show a great deal of promise. In 2014, auto sales grew 32 percent compared to 2013, while CBU (complete built unit) sales rose 83 per cent. These are encouraging figures, and although we expect that 2015 may be a little slower, we are still expecting to see strong development of the industry.

Vietnamese duties of 60 per cent will be eliminated by 2018 for cars imported from within the Association of Southeast Asian Nations. How will this impact the local industry?

This will depend on the ability of the Vietnamese auto industry's ability to close the gap created by local cost issues. As it stands, the cost of producing cars in Vietnam is more expensive than in other markets in ASEAN, however, this is currently balanced out by existing import tariffs. It will be necessary for the government to support enterprises to close the cost gaps and strengthen the cost competitiveness of local operations, maintain consistency and transparency in policies, reduce high taxes, and to expand market size to utilize the economies of scale. These are achievable, but the industry needs to work closely with the government to ensure that win-win outcomes are able to be achieved.

What do you think about the future of the Vietnamese automotive market?

I'm very optimistic about the future of both the automotive market in Vietnam, and the automotive industry. While there are challenges that we will have to meet, we have a competitive workforce in this country, and we are geographically well-positioned to service both South East and East Asia. At Ford Vietnam, we look forward to embracing the opportunities that the future holds.

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