Vietnam automobile industry is currently stopping at simple assembly. The average localization ratio is about 7-10%. Most of the domestically produced components are simple with low value and mostly used for trucks and coaches. Meanwhile, core components and accessories to manufacture complicated details which require high technology are hardly invested properly; consequently, they are mostly imported.
Automobile assembly and manufacture have generally tended to grow strongly since 2013. The reasons for a plunge in the period of 2011-2012 are the effects of the economic recession and policies to tighten lending for consumption. However, the economic recovery, the outbreak in lending for consumption, low and stable interest rate and the government’s policies to support the automobile industry promote manufacture.
Although the price of cars in Vietnam is twice as high as that in other countries in the region, since 2013 the total consumption of automobiles has constantly increased, making the market more active with unprecedented high growth rates, particularly in 2016 when the consumption increased by 24% compared with that in 2015, the peak in 20 years. The automobile consumption in 2016 is much higher than that in 2015; however, the consumption of imported cars in complete units which increased remarkably in two years tends to be slower due to the special consumption tax.
Northern consumers choose small and family cars, while those in the South are inclined towards big, multipurpose vehicles because the North are more interested in brand-class; whereas, the South concern about the quality of products.
According to the prediction of Vietnam Industry Research and Consultancy JSc. (VIRAC), the automobile ownership rate of Vietnam is still lower than that in the region’s countries as well as the world.
In 2016, Thailand overtook Korea and India to become the leading market in supplying autos to Vietnam. Meanwhile, the number of imported cars from Indonesia continues growing quickly. The reason is that pick-up truck models of automobile brands worldwide almost concentrate in Thailand, while the consumption of them in Vietnam has tended to rise. Furthermore, the price for imported cars from Indonesia is the cheapest among all countries from which Vietnam imports.
In addition to the risks of policies, politics and exchange rate, the automobile industry must face many obstacles about capital, technology, human, the government’s policies, facilities and environmental pollution.
With the forecasted growth rate of 10-15% in the period of 2016 – 2020, the automobile industry will continue to grow strongly in the segment of locally assembled vehicles, meanwhile, the truck segment will slow down due to the demand balance.
Overall, in the first three months of 2017, Vietnamese automobile market increased by 8% compared with 2016.
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