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Concerns on foreign cars outgrow assembled cars in Vietnam

Concerns on foreign cars outgrow assembled cars in Vietnam

Friday 17, 01 2020

CBU cars imported into Vietnam in the first months of this year increased nearly five times compared to the same period last year and are expected to continue to rock the domestically-assembled cars in the near future.

Minister and Chairman of the Government Office Mai Tien Dung has said recently that the Government would soon issue amendments to Decree 116/2017 on conditions of car production, assembly, import and warranty and maintenance service. In which, some regulations related to imported cars would be eliminated. For example, instead of the batch inspection form as currently regulated, the Government would amend the Decree so that imported cars would be inspected by type, moving from pre-inspection to post-inspection, etc. The Ministry of Industry and Trade has also requested the Government to amend and supplement Decree 116 in the direction of removing some conditions on automobile imports.

1. Reduce costs for businesses

Many cars importing companies commented that if the amendments to Decree 116/2017 takes effect, it will be easier for CBU to enter the Vietnam. The representatives of Thaco said: inspection by type means that each type of vehicle only needs to be sampled to check emissions and safety for the first time and the results will be applied to subsequent shipments if there is no change in specifications. “Therefore, the removal of regulations on batch inspection and switch to type inspection will help enterprises in importing. Thus reducing the cost of inspection, manpower, especially clearance time for goods "- Thaco's representative shared.

Concerns on foreign cars outgrow assembled cars in Vietnam

The director of a company specializing in distributing and importing cars from Europe also said that at that time, due to emissions and safety checks for each imported vehicle, it took about 45 days to complete the procedure. Each lot of imported cars, businesses had to take at least one as sample and hired someone to use it for more than 3,000 km, then checked its quality so it was very time-consuming.

Moreover, up to now, there is only one registry center in Hanoi that has enough conditions to check, so all imported cars are gathered here. This has increased the importing time and cost. The more time it takes, the more the warehousing costs, the higher the interest rates becomes, etc. "When removing batch inspection, switching to inspection in the same type as the draft amendments to Decree 116, the upcoming imported CBU cars will be smooth and the CBU cars will arrive sooner, saving costs more.” – The representatives analyzed. 

Another notable changes in the amendments to Decree 116 proposed by the Ministry of Industry and Trade is the suggestion about eliminating conditions related to safety conditions, labor hygiene, fire safety, fire-fighting plan, thus eliminating the conditions required the technical persons in charge of automobile production and assembly lines must have a university or higher degree in mechanical engineering or automobiles and have at least five years of experience in the field of automobile manufacture and assembly. 

2. Remaining arguments

Recently, some countries like Thailand, Malaysia, Indonesia, America, and Japan, etc. have expressed concerns about the possibility of the Decree 116 generating more procedures, resulting in barriers for businesses to export cars into the Vietnamese market. However, the abolishment of regulations related to administrative procedures which cause difficulties for cars importing businesses is necessary. 

However, there are still concerns about whether the abolishment of many conditions in the Decree will lead to imported cars to flood the Vietnamese market and crush domestic production and assembly vehicles. “Cars imported from Thailand and Indonesia have already had significant pricing advantages compared to the domestically-assembled cars, and now as the importing regulations become more open, it is easier for them to flood the market, leading to challenges for domestically-assembled cars” – Representatives of a cars manufacture and assembly expressed his worry. 

According to the General Department of Customs, from the beginning of the year to the end of July 2019, Vietnam imported nearly 87,000 CBU cars, nearly 4.6 times over the same period last year. The import value of car components and spare parts in the first seven months of 2019 amounted to 2.4 billion USD, up 15% over the same period. 

However, Mr. Bui Xuan Truong, Director of Truong Thanh Auto Company, said that the volume of imported cars would not increase more than now if removing the conditions on imported cars. He argued: “Currently, the most difficult barrier in Decree 116 is that the certificate of origin has been met by car manufacturers, the number of imported cars has increased sharply.” "Besides, the cancellation of the batch inspection will reduce the costs, so the price of imported cars will decrease, but not by much," he said.

According to an analysis of automobile expert Nguyen Minh Dong, imported cars are increasingly narrowing the sales gap with domestically-assembled cars because the import procedures have been met by car manufacturers, making the supply more abundant.

Therefore, in order to increase the competitiveness of domestic cars, Mr. Dong said that it is necessary to adjust the tax and fee policies to help domestic automobile manufacturers and assemblers reduce costs, leading to lower car prices, and people having many opportunities to own cars. But the most important thing is that domestic production must strive to improve quality, lower production costs to increase the most competition with imported cars. Because of the high price of domestically-manufactured and assembled cars, this industry is still difficult to develop.

>>> Concerns on foreign cars outgrow assembled cars in Vietnam

Compiled by PLO – Translated by Kit – Vietnam Credit. 

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Financial News

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