First, a brief history of the development of Vietnam's automobile industry
On December 21, 1958, the "Victory" plant in Hanoi, Vietnam, marked the beginning of vietnam's auto industry by the first car built by Vietnamese imitating French gasoline-powered Fregate cars. However, due to the war in the north, the "victory" brand car was not able to produce.
Pictured: "Victory" truck (4-8.4 tons) from the chienthang website
However, it was not until 1991 that the Vietnamese automobile industry really took shape and began to develop intensively ever since. That's about 30 years behind the rest of Southeast Asia, where Thailand, Indonesia and Malaysia developed their automotive industries in the 1960s. Vietnam's automobile industry started too late, can only survive in the cracks, the market is difficult to find its traces.
Faced with opportunities and challenges, the Prime Minister of Viet Nam approved Decision No. 1168/QD-TTg on the Development Strategy of Vietnam's Automobile Industry from 2025 to 2035 on July 16, 2014; Decision No. 1211/QD-TTg on the Development Plan for Vietnam's Automotive Industry from 2020 to 2030 on July 24, 2014; Decision No. 229/ on The Implementation of the Development Strategy of Vietnam's Automotive Industry on February 4, 2016 Decision QD-TTg. Since then, Vietnam's automotive industry has entered the fast lane.
In June 2017, Pham Nhat Vuong, Vietnam's richest man, founded VinFast Automobiles, gradually picking up the girder of Vietnam's national car brands.
Pictured: VinFast Lux A2.0 sample car from VinFast's official website
On October 17, 2017, Vietnam issued Agreement No. 116/2017/ND-CP, which stipulates the conditions for automobile manufacturing, assembly, import and provision of automobile warranty and repair services.
According to the Vietnam Registration And Inspection Bureau, the production of domestically produced and assembled vehicles so far in 2018 is as follows: in 2018, the number of locally manufactured and assembled vehicles reached 287,586; in 2019, 339,151 locally produced assembled cars, and 323,892 domestically assembled vehicles in 2020. (Note: The data includes vehicle types manufactured or assembled from individual components, as well as vehicle types manufactured or assembled by certified base vehicles or other new vehicles).
By the end of 2020, there will be more than 40 enterprises engaged in the production and assembly of automobiles in vietnam's automotive industry, including cars, trucks, buses, special vehicles and chassis vehicles. The total design and assembly capacity is about 755,000 vehicles/year, of which foreign-funded enterprises account for about 35% and domestic enterprises account for about 65%.
In the past three years, the production and assembly of vehicles with less than nine seats has actually met about 70% of the domestic demand. Light trucks under 7 tons, passenger cars with 25 seats or more, and domestic special vehicles have a high localization rate (about 50% of light trucks and more than 60% of the whole vehicle), achieving the set goal and basically meeting the needs of the domestic market. In particular, a number of products (buses and passenger cars manufactured and assembled by Thaco) are exported to Thailand, the Philippines and other countries. By the end of March 2021, VinFast has launched 4 gasoline vehicles and 7 electric vehicles to the market, of which VF e35 and VF e36 electric vehicles are preparing to enter the US market.
Domestic automobile manufacturing and assembly enterprises contribute billions of dollars to Vietnam's state finances every year and create jobs for hundreds of thousands of direct workers.
Second, Vietnam's auto industry ambitions: by 2035 all switch to electric vehicles, known as a hundred years of change
VinFast has just delivered an electric vehicle modeled VF e34 to customers in the Vietnamese market. In the C-class SUV segment, the car is equipped with a 110 kW (147 hp) electric motor, which is equivalent to a 2.0-liter gasoline engine. It uses a battery pack with a capacity of 42 kWh and can travel about 285 kilometers when fully charged. The car supports super fast charging, and can travel about 180 kilometers after charging for 18 minutes.
Pictured: VinFast VF e34 electric vehicle prototype from VinFast's official website
VinFast said more than 25,000 customers have purchased the model so far, and about 2,000 cars will be delivered to dealers every month starting in early 2022. The development of electric vehicles was announced in March 2021, and by the end of December 2021, Vietnam's first model has been launched.
Recently, the Vietnam Machinery Enterprises Association (VAMI) sent a proposal to the Prime Minister on the strategy of developing a clean fuel vehicle industry. According to the opinions of the member enterprises of the association, the production and assembly of electric vehicles is conducive to improving the localization rate and attracting investors to produce batteries. This is in line with the development trend of the global clean fuel vehicle industry, which is conducive to reducing environmental pollution and is also conducive to exports.
Since then, VAMI has proposed to the government the goal of developing a development roadmap similar to thailand's development of clean fuel vehicles, that is, by 2035, all newly registered car companies must be clean fuel vehicles, that is, from 2035, the Vietnamese automobile industry will only produce pure electric vehicles.
Vingroup, the Vietnam Automobile Manufacturers Federation (VAMA) and VAMI have respectively proposed to the Vietnamese government that special preferential tax policies similar to those of Thailand and other countries should be implemented for car companies to produce electric vehicles to support the development of the electric enterprise industry.
After consulting the opinions of relevant ministries and commissions, the Ministry of Finance recommended that the government exempt the registration fee for electric vehicles for 3 years and reduce it by 50% in the next two years. The administration has just submitted a proposal to Congress to reduce the special consumption tax rate on electric vehicles in the first 5 years, from the current 15% by 5-12 percentage points.
Of course, Vietnamese experts have also broken their hearts in order to achieve the long-term goal of the Vietnamese automotive industry in 2035. Among them, the expert Nguyen Minh Tung also cited the development plan of electric vehicles in Thailand, India and indonesia west, and the Canadian government's subsidy policy of 7,000 Canadian dollars for residents to buy electric vehicles, and even specifically mentioned the support policies of the Northern Power Country, the Chinese government, for the electric vehicle industry: electric vehicle manufacturers are supported by the State Grid, and the financial subsidy for the construction of charging stations is 30%, and the subsidy for each vehicle produced is nearly 8,000 US dollars. Residents receive a subsidy of $17,000 when they buy an electric car, a 50-100% reduction in registration fees, free charging...
Finally, the expert fervently appealed: "Vietnam should not slow down in the electric car race. Many countries have very well-organized roadmaps and policies for the development of electric vehicles, and always update policies according to the actual situation of development."
Third, the development of Vietnam's automobile industry urgently needs to solve the problem
The author believes that in order to realize the above ambitions, the Vietnamese automobile industry must first solve the "three highs" problem in front of the development of the automotive industry:
1. High tariffs
Reality shows that Vietnam still implements a very high tariff policy on automobiles, making the price of imported cars in Vietnam 3 to 4 times higher than that of France, the United States, Japan and other countries.
In 2006, Vietnam imposed import taxes on imported used cars: 1) 5 seats or less: 3000-25000 US dollars / car; 2) 6-15 seats: 8000-2000 US dollars / car.
Today, import tariffs, despite some reductions, remain very high. For example, the current tariffs on tourist cars with less than 10 seats: 1) origin ASEAN countries: 30%; 2) other countries: 70-80%.
2. High taxes and fees
Vietnamese consumers have questioned why the same car produced by domestic companies such as VinFast is priced much higher than imported Japanese and Korean cars. In the face of the questioning of the representatives of the National Assembly, Vietnamese XXX minister replied: At present, Vietnam's automobile national enterprises are still in the initial stage of development, there are fewer domestic automobile production enterprises, so they have to bear more taxes and fees, and when the automobile industry develops and grows, the taxes and fees borne by automobile enterprises will naturally decline, and then domestic car companies will reduce from the current 80% tax to a lower level...
Vietnamese consumers are also subject to a series of taxes and fees when buying a car, such as:
1) Import duty (Thu nh p kh u): applicable to imported cars, of which tourist cars with less than 1 seat: 1) origin ASEAN countries: 30%; 2) other countries/regions: 70-80%;
2) Special consumption tax (Thu tiêu th c bi t): 35%-150% x vehicle price according to the displacement of the car;
3) Value Added Tax (VAT): 10% x Vehicle Price;
4) Registration fee (Phí tr c b): 10% x vehicle price in the first year; from the second year onwards, the local government implements different tax rates, up to a maximum of 50%, of which 10% / year in Ho Chi Minh City and 12% / year in Hanoi City.
5) Inspection fee (Phí ki m nh): the cost of checking whether the quality of the car is up to standard and whether it can be used: 240,000 rp for cars with less than 10 seats, RP 100,000 for inspection certificates.
6) Car license fee (Phí l y bi n s m i): The charges vary from place to place. Hanoi 20 million shields, Ho Chi Minh City 11 million shields, other central municipalities, provinces and cities 1 million shields, other areas of 200,000 shields.
7) Road maintenance fee (Phí b o trì ng b): 1.56 million rp/year for cars with less than 10 seats, Rp 130,000 per month.
8) Compulsory civil insurance premium (Phí b o hi m d n s b t bu c): RP 480,700 for non-operating cars with less than 6 seats, RP 873,400 for 6-11 seats/ year.
9) Substance insurance (B o hi m v t ch t): non-compulsory insurance. This type of insurance is negotiated by the owner with the insurance company, charged at x% of the vehicle price, and pays for the car in the event of a traffic accident, the car is damaged or the car parts are stolen.
10) Body insurance (B o hi m th n v): Non-mandatory insurance. This type of insurance is negotiated by the owner with the insurance company to compensate for damage to the body and tires, such as body paint scratches, collisions, dents, fire damage, etc.
3. High price
In China, urban mobility cars are less than 30,000 yuan, and at this price, office workers in Vietnam can only buy a good quality motorcycle.
At present, the price of cars in Vietnam is 2 to 3 times more expensive than in other countries. Vietnam's car prices are currently leading the world, with vietnam's car prices not less than $350 million (i.e. $15,000) plus nearly $20 million in taxes paid annually (third in taxes, behind the United States at $3,500 and the European Union at $2,800). This kind of car is just a domestic urban scooter.
Secondly, the Vietnamese government should also introduce relevant support policies and preferential tax policies for the automotive industry, and introduce specific development strategies, development routes and supporting measures that are consistent with the actual development of development.
Note: The image of this article comes from the network.
Disclaimer: This article represents only the views of individuals and does not represent the views of the Company and others. For reference only, if you use this article to guide the practical operation, the consequences will be at your own risk.
Author: Lu Diangu, Master of Civil and Commercial Law student at the University of Chinese Academy of Social Sciences, Commercial Manager of Kelvin Chia Partnership Ho Chi Minh City Branch.