Tuesday, November 13 2018

VietNamNews

MoIT wants to cut tax for locally produced auto parts

Update: October, 25/2018 - 16:54
An auto assembly line at the Đông Bản Việt Nam Auto JSC. — VNA/VNS Photo Danh Lam
Viet Nam News

HÀ NỘI — The Ministry of Industry and Trade (MoIT) wants to take advantage of market and policy opportunities to promote automobile manufacturing projects of domestic automakers including Trường Hải Auto Corporation (Thaco), Thành Công Group and VinFast.

The ministry submitted a report to the National Assembly deputies that said it aims to raise the output of domestic auto manufacturing and build up a supply chain for automakers in the country.

The MoIT also proposed the policy makers promulgate the revision of the special consumption tax rate for vehicles with a high localisation rate (measuring the use of local parts). Locally produced parts will be free from the tax.

The ministry said output of locally manufactured and assembled automobiles had increased in recent years. Domestic automobile manufacturing reached 283,300 units in 2016, up from 200,000 the previous year. Vehicles have been exported to Laos, Cambodia, Myanmar and the Mid-America region. However, the MoIT said the industry had not yet created co-operation among businesses.

The localisation rate of several types of cars is still lower than the target because the industry lacks a network of material suppliers and large-scale parts producers. Although the target rate was set at 40 per cent in 2005 and 60 per cent in 2010, it sits at just seven to 10 per cent on average. Thaco leads among manufacturers with a rate of 15 to 18 per cent, while Toyota Motor Vietnam reaches 37 per cent for the Innova model alone.

Localised parts are primarily simple components like tubes, tires, sears, mirrors, wires, batteries and plastic products. Meanwhile, 80 to 90 per cent of the raw materials for automobile production, including steel, aluminum alloys, plastic resin and high tech rubber, are currently imported. This amounts to US$2-3.5 billion.

Until 2025 and 2035, the MoIT said the industry would focus on small sedans suitable for Vietnamese people and follow the worldwide trend of environmentally friendly vehicles like hybrids and electric cars.

The industry target is to meet 60-70 per cent of market demand with a localisation rate of 35-40 per cent by 2020. It will continue to focus on trucks, buses and specialised vehicles serving agriculture and rural development.

Total industry output in 2018 is not expected to be higher than in 2017. Automakers’ business results will depend on their ability to implement the Government’s Decree 116, which details acceptable conditions for production, assembly, import and handling of warranty and maintenance services. Car production this year is expected to reach 235,000 units, down 1.3 per cent compared to 2017. — VNS

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