A worker at a car assembly plant of Ford Hải Dương. — VNA/VNS Photo

HÀ NỘI — Việt Nam has been striving to build an automotive industry for many years to come, with the goal of replacing imports and gradually moving towards exports.

The industry is at a pivotal stage as it has to navigate opportunities and challenges presented by an array of free trade agreements (FTAs). 

With 16 FTAs in effect, including the United Kingdom – Việt Nam Free Trade Agreement (UKVFTA), the country’s ambition to expand its automotive footprint on the global stage is gaining momentum. However, to thrive in the highly competitive market, structural reforms and strategic foresight are crucial.

The UKVFTA and other major agreements, such as the European Union - Việt Nam Free Trade Agreement (EVFTA) and the ASEAN Trade in Goods Agreement (ATIGA), provide Việt Nam’s automobile industry with unparalleled access to global markets. Key provisions include gradual tariff reductions on imported automotive components and vehicles. 

This reduction allows Vietnamese manufacturers to import high-quality components and advanced technology at lower costs, boosting domestic producers' competitiveness. Additionally, the agreements open export opportunities for Việt Nam’s automotive parts and components. 

But Việt Nam’s growing automobile industry faces fierce competition. 

Imports from established automotive hubs like Thailand, Indonesia and the EU often outperform domestically produced vehicles due to superior quality and competitive pricing. The reduction of import tariffs has intensified this pressure, prompting concerns over market share erosion for local manufacturers.

For instance, under the EVFTA, tariffs on completely built units imported from the EU will reduce annually by approximately 6.4 per cent, reaching 0 per cent by 2030.

Moreover, compliance with stringent environmental, labour and technical standards imposed by FTAs remains a significant hurdle. As an emerging market, Việt Nam’s automotive sector must navigate these complexities while maintaining cost efficiency.

To capitalise on FTA benefits, Việt Nam’s government has implemented several supportive policies. These include tax incentives and fee reductions aimed at bolstering domestic production and encouraging foreign investment. 

Meanwhile, Vietnamese automotive enterprises must also thoroughly understand FTA commitments, including the UKVFTA’s, to harness available opportunities effectively.

Embracing innovation, enhancing product quality, and fostering strategic partnerships will be key in seizing the opportunities presented by the agreements and ensuring sustainable growth in the long term.— VNS