One of the biggest weaknesses of Vietnam's automobile industry today is its major dependence on foreign
Gradual increase in localization rate
The mechanical engineering support industry is considered a major driving force for the development of this “backbone” industry. The most successful segment of the supporting industry to date serves the motorcycle industry with a localization rate of about 85 to 90 percent. Vietnam currently has hundreds of enterprises producing spare parts and metal components for motorbikes in large quantities, meeting the standards of assemblers and forming a quite efficient supply system.
Enterprises producing metal components supply part of the auto industry’s demand
Enterprises producing metal components for the automobile industry are also supplying part of the demand. In particular, a value chain of manufacturing support components has been formed for assembling high-quality 80-seat buses with a localization rate of 40 percent, together with expanding the manufacture of trucks used in the agriculture sector. This value chain also meets the requirements of special-purpose vehicle production with the same quality as other ASEAN countries.
The Vietnam Association of Mechanical Industry (VAMI) said that in recent years, with efforts to change production methods and management structures, research units and mechanical enterprises have gradually increased the localization rate and can produce many complex mechanical products with high value and a high technology level. Some products have reached international standards and quality. Accordingly, a number of Vietnamese mechanical enterprises have participated in several global mechanical supply chains.
Strengthening support for enterprises
According to Do Phuoc Tong, Chair of the Ho Chi Minh City Association of Mechanical and Electrical Enterprises (HAMEE), few mechanical enterprises are capable of investing in modern machinery and equipment to manufacture high quality products for export and replace imports, and they are facing many difficulties to survive and develop sustainably. Every year, Vietnam has to spend several tens of billions of dollars importing machinery and equipment to build and develop domestic industries.
Tong added that in order to develop support industries for the mechanical engineering industry, the state needs to develop support programs on technological innovation; offer policy incentives for mechanical enterprises to relocate to industrial parks and industrial clusters at reasonable costs. At the same time, the list of products required by foreign-invested enterprises operating in Vietnam should be made public and training costs provided to improve the qualifications of engineers and technicians employed by supporting industry enterprises.
A representative of the VAMI urged expanding medium and long-term loans with reasonable interest rates and capital repayment time in accordance with capital recovery capability of each specific project and product, facilitating easy access to loans for development investment.