Vietnam Struggles with Auto Sector Development

By Brendan Moore

09.03.2007

Despite the government’s heavy emphasis on building a domestic auto industry, Vietnam has made very slow progress in the area of setting up in-country vehicle production. Vietnam considers homegrown vehicle production capacity a must for the country’s future, but the governmental efforts in the automotive sector so far have produced almost nothing in the way of progress.

A major part of the problem, critics say, is the government itself. The Vietnamese government has tasked five ministries with developing and carrying out the strategy for making a domestic auto industry come into existence, and coordination between all five agencies has been slow and riddled with missteps.

Here is the lineup: The Ministry of Science and Technology is in charge of manufacturing resources; the Ministry of Industry and Trade devises the overall auto policy; Finance is in charge of tax policy affecting the sales transactions; Transport is responsible for safety standards and the Ministry of Environment and Natural Resources are responsible for emission standards. With cooperation and coordination required between all five agencies and the usual jockeying for power among government agencies occurring in Vietnam as in other countries, the drive for a Vietnamese auto industry has been painfully slow.

The other pieces of this puzzle are low sales of both trucks and cars in Vietnam, and the absence of the supporting industries needed for a thriving auto industry.

As an example of the problem of low sales, Vietnam has only around 133,000 cars (virtually all imported) in a country of 84 million people. And most of the commercial trucks sold in Vietnam also come from somewhere else; Vinacomin, the largest truck manufacturer in Vietnam, sold only 501 trucks last year.

The dearth of supporting industries is exemplified by the fact that there are only 40 foreign-controlled small-to-midsize companies and 30 small domestic companies that make auto components like tires, batteries, axles, etc.

Of course, with so few sales of new cars, there is no incentive for any auto-related business to expand. It doesn’t matter what the government does, or, how well they do it, if there is no market for goods produced.

It should be noted that Vietnam does have some resources related to the auto industry; for instance, Renault-Nissan employs around 1000 automotive engineers in Vietnam that do work for products in the Chinese market. Other auto companies have similar arrangements with engineering resources in Vietnam. Small potatoes, certainly, at least compared to the Vietnamese national goals, but a small measure of progress.

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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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2 Comments

  1. Good, I hope they don’t figure it out for at least another 50 years.

  2. Can Vietnamese cars be made any worse than Chinese cars?

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