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Incentives needed to drive auto industry

Update: February, 12/2015 - 08:57

Viet Nam's automobiles industry has experienced two decades of formation and development with many businesses encouraged to join the auto support industry.

The Chairman of the joint stock automaker Vinaxuki, Bui Ngoc Huyen, shared with the Vietnam News Agency reporter Duc Dung his opinions on the Government's policies on land, technological transfer, and long-term, low-interest-rate loans to stimulate the automobile spare parts manufacturing business.

Bui Ngoc Huyen
Can you assess the Government's support for the country's automobile industry's development during the past few years?

During the recent times, the Government has adopted a number of policies to develop the industry. But I have to say that such support is insignificant. For example, the Government announced a policy to support national key engineering, and maintained lending at an interest rate of zero per cent for ten-year loans.

However, Vinaxuki has had to borrow loans from banks at a high interest rate and the term for which has been from one to three years.

Vinaxuki has made investment in the high-technology sector, especially for shaping, laser cutters and painting robots. However, we have not received much support from the Government.

In addition, the sector has no studies on which to base an exact prediction as to what are the market's needs, leading to the fact that policies on tax and production support are far removed from the market reality. As a result, we have failed to develop the automobile production industry, and only developed the automobile assembling industry, which contributed nearly 1 per cent to the GDP.

What difficulties and obstructions has your firm faced in the past?

Vinaxuki has built workshops and factories, manufacturing different kinds of chassis and carbines for trucks and cars, with a locally-made part rate of more than 40 per cent, which is qualified for export to ASEAN countries. Our factories have manufacted fuel-saving and low-cost cars for farmers and the middle-class that meet international export standards, but high taxes have pushed their prices up.

Vinaxuki can produce and sell a car for between VND130-140 million (US$6,190-6,665) each, if it is not taxed like other countries.

In addition, Vinaxuki also faces a lack of funds for production and has to pay high interest rates on loans. The firm's assets, which can be given as collateral for loan, cost VND4 trillion ($190.48 million), but Vinaxuki has still failed to get loans.

Many people are of the view that to develop our automobile manufacturing industry, we need to base the model of development on foreign direct investment (FDI) businesses. What do you think about this?

It is right, but it is important to choose which foreign investor will be selected for investment.

The aim of foreign automobile makers in Viet Nam is to earn profits, rather than develop the domestic automobile industry. We should follow in the footsteps of South Korea, Japan and China.

For example, China had bought technology and assembled cars following the Japanese automobile industry, but when they reached a high percentage of locally-made parts, Japanese businesses were no longer allowed to operate in the country. In South Korea, they developed a car with a small engine of 0.8 litre and then ramped it up to 1.0 litre and later 1.5 litre. They too have regularly increased the locally-made rate of parts.

Viet Nam should cooperate with foreign investors for spare parts manufacturing to produce engines, steering-wheels and other complicated parts. The Government should also formulate policies that prioritise car accessory production over assembly.

What do you propose that the Government and relevant sectors should do to develop the industry?

Building an automobile industry is not easy. However, if the Government's measures are right and timely in solving the difficulties posed to businesses and in luring investment capital, the country will surely boost the rate for locally-made parts to 40 to 45 per cent, produce "Made-in-Viet Nam" cars and then export them in the next 15 or 20 years.

In my opinion, the Government needs to continue with its preference for long-term loans at low-interest rates. On land and technology transfers, it should help ramp up the operations of spare part makers.

It is necessary to build a vanguard business that leads in technology and production, helping create satellite businesses. — VNS

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