Industry Focus >>In 2023, Vietnam reported the ownership of 930,000
vehicles, of which 48% were commercial vehicles& buses and 52% were small and medium-sized
passenger cars. As Vietnam's automotive component
manufacturing and production capacity is insufficient,most assembly and sales in Vietnam are completed
by international brands, and automotive component
manufacturers are mostly foreign-invested, so most
key components for passenger cars, commercial
vehicles, or trucks have to rely on imports.

Emerging Market
Opportunities-

Vietnamese
Automotive Industry
新興市場商機—越南汽車產業

Hardware & Fastener Components - no.62/2024

I. Overview of the Development ofVietnamese Automotive Industry
Vietnam is located in the eastern part of Indo-China Peninsula,bordered by the Gulf of Tonkin and the South China Sea in the eastand south, Yunnan and Guangxi in the north, and neighboring Laosand Cambodia in the west, with an area of 330,000 square kilometers, acoastline of more than 3,200 kilometers, and a population of more than
90 million people. Vietnam had been in a state of prolonged war since
the mid- 20th century, and only after the reunification of North and South
Vietnam did the country gradually recuperate. Due to the prolonged
period of war and communist dictatorship, Vietnam seriously lacks
the conditions for the development of the automobile industry, and thetechnical basis for the R&D of the automobile industry and its production
is very weak. Before the reform and opening up, the demand forautomobiles in Vietnam mainly relied on the import of complete vehicles
from the old Soviet Union or chassis from the former East Germany,
which were assembled into medium- and large-sized passenger cars in thefactories in Hoa Binh, Ba Dinh, Nam Ha, Hai Phong, Da Nang, and soon. After the dissolution of the Soviet Union and the unification of Eastand West Germany, Vietnam lost its original source of imports. In orderto ensure the supply of the domestic automobile market, the Vietnamese
government formulated a policy to allow foreign investors to set up
automobile assembly plants in Vietnam, and approved the establishmentof two automobile plants, namely, the Korean-Vietnamese joint venture
Vietnam Mekong Automobile and the Japanese-Korean-Vietnamese
joint venture Vietnam Motors Corporation (VMC), gradually forming theVietnamese automobile industry.

088 惠達雜誌In recent years, the rapid economic growth, expanding
domestic demand, coupled with the signing of tariffs
and economic & trade agreements with a number ofcountries, have made Vietnam the core of the economic
development of ASEAN, and the investment in theautomotive industry is vibrant. In addition to the local car
manufacturers like VinFast and Thaco actively expanding
their production, Korean Hyundai and Vietnam's local car
manufacturers also launched a joint venture to produce
cars. Especially since January 2018 ASEAN haveabolished the tariffs on automobiles, imported cars andcomponents from Thailand and other ASEAN countries
will lead to the risk of decline in Vietnam's automobile& components industry. The Vietnamese government
has actively cultivated the market for strategic vehicle
types, developed the peripheral industries and expanded
the integration of resources for the OEMs to plan and at
the same time, actively plan for the construction of steel
mills and large-scale automobile factories.

II. Vietnam's Automotive Industry
Policy & Development
Vietnam has reduced its import tariffs on automobile
components since January 2008. It has reduced the tariff
rates on both small passenger cars with 5-7 seats andautomobile components with more than 16 seats by 3-5%,
making the new rate for the former to be 20-25% and thatfor the later to be 13-17%. According to the developmentof Vietnam's automobile industry, Vietnam's automobile
tariff will decrease year by year. Vietnam's automobile
tariff for ASEAN was 50% in 2014, 35% in 2015, 20%
in 2016, 10% in 2017, and down to zero after 2018
onwards. The imported automobiles caused an impact
on the automobiles manufactured in Vietnam, and a
lot of automobile manufacturers dared not to invest
in them hastily. In order to avoid the risks brought
about by the tariff decrease year by year and improve
Vietnam's automobile assembly & domestic components
production, manufacturers suggest that the government
should formulate relevant industrial policies.
The Vietnamese government insists on making theautomobile industry the focus of industrial development,
hoping to increase the proportion of automobile parts
production and vehicle assembly & domestic production.
In response to the demand of automobile manufacturers,
the import tariff rate of complete automobiles has been
lowered several times in order to stimulate the production
and assembly of automobiles in the country, and at thesame time, in order to support the development of theIndustry Focus >>Many automobile assemblers & manufacturers
continue to ask the government for rental tax incentives.
The automobile manufacturing industry is one of theindustries that enjoy rental tax incentives and preferential
policies on the acquisition of land for the establishment offactories. The Ministry of Finance, in coordination with
the Ministry of Commerce and Industry, has reported
to the Central Government for approval and formulated
preferential policies for automobile investment andproduction, including the implementation details of theSpecial Consumption Tax Law on Automobiles.
In 2018, Vietnam was required by the ASEAN Tradein Goods Agreement (ATIGA) to remove import tariffs
on ASEAN automobiles and completely open up thedomestic automobile market, which, coupled with theimplementation of the ASEAN FTA and a considerable
amount of local demand, may attract more international
automobile manufacturers to move in.

including Taiyuan and Hai Phong, etc., and the other is centeredon Ho Chi Minh City, including Dong Nai Province, Binh Duong
Province, and the Thanh Hoa assembly base, etc. These two economic
zones are located near ports with convenient transportation and play asnorth-south logistics centers. People there have higher income levels andhigher spending power, while the two major industrial clusters have manylarge-scale state-owned traditional machinery manufacturing companies
and better resources for skilled labor and technology, so leading
automobile manufacturers have chosen them to set up production or sales
bases, forming automobile industrial clusters.
In order to encourage automobile manufacturing, assembly andproduction of automobile parts, the Vietnamese government has integrated
resources and allocation of parts in 3 major economic regions and nearby
areas, including North Vietnam (Hanoi, the economic delta of Hải Phòng
& Ninh Bình provinces), Central Vietnam (Da Nang City, Khánh Hoà),and Southern Vietnam (the automotive cluster consisting of 4 economic
regions (including Hồ Chí Minh City, Bà Rịa - Vũng Tàu, Đồng Nai, Binh
Duong), and Phố Cần Thơ).
In order to increase the proportion of domestic production of
automobiles, the Vietnamese government has implemented a seriesof measures, including low-interest loans and preferential tax policies
for domestic manufacturers, setting import tax rates based on different
components to replace the original Complete Knock Down (CKD)
import tax, proposing a preferential mechanism for the manufacture ofautomobile engines, transmissions, and the production of specialized andgeneral automobile projects, etc., and expanding the export of automobile
components to neighboring countries and regions. Most key components
such as engines, transmissions, chassis and suspension are imported.
Figure 1 shows the main automotive industry clusters in Vietnam.

Figure 1. The Main Automotive Industry Clusters in Vietnam

Vietnam encourages leading international automobile
manufacturers to set up their presence in the Vietnamese
market. In order to prepare the Vietnamese domestic
industry for early response, the Ministry of Industry andTrade (MOIT) has proposed a policy to help Vietnam's
automobile industry to improve its competitiveness,according to which Vietnam will impose high tariffs
on the import of luxury automobiles, encourage
local enterprises or joint ventures to engage in the
production of automobile parts or complete build unit
(CBU) in the country, and reduce import and export
tariffs. The Vietnamese government has adjusted its
policy on the automobile and component industries in the
direction of reform, opening up and internationalization.
The Vietnamese government hopes to develop
automobiles as an important industry that can meet thecountry's domestic demand and enter the ASEAN region
and international markets.

III. Vietnam's Automobile Industry
Cluster
Vietnam's automotive industry is mainly
concentrated in two major economic zones. One iscentered on the capital city of Hanoi, Tra Noc 1st
Industrial Zone in Can Tho City of southern Vietnam,

Source: britannica and ITRI IEK (04/2024)

Vietnam's leading automobile-related manufacturers, including
Vinamotor, Veam, Vinacoal, and SAMCO, invest in the manufacturing
and assembly of automobiles and related components, with Vinamotor
focusing on the manufacturing & assembly of passenger cars, small &medium-sized trucks, cars, engines, gears and transmission modules,
Veam engaged in the manufacturing and assembly of passenger cars, small
惠達雜誌

Hardware & Fastener Components - no.62/2024

automobile industry, the automobile industry has beenclassified as a highly protected industry, and has beenprotected by high tariffs, including the import tariffs andspecial consumption tax. In accordance with the ASEANFTA and Vietnam's commitment to trade liberalization,
the government has prepared countermeasures. The
Ministry of Industry and Commerce of Vietnam proposes
to develop Vietnam's automobile industry with tax
policies, pointing out that large-sized enterprises should
be encouraged to develop the automobile industry on
the basis of equal and non-discriminatory manufacturing
between domestic and foreign enterprises, and that
automobile production and components manufacturers
should develop peripheral industries to deepen theirintegration into the global value chain of the automobile
industry.

089

Industry Focus >>and medium-sized trucks, engines, gears and transmission
system components, Vinacoal manufacturing and assembling
medium- and large-sized trucks, specialty automobiles
and ancillary components; and SAMCO manufacturing
and assembling passenger cars and producing automotive
components.
According to the statistics of the Ministry of Industry ofVietnam, more than 30 manufacturers (mainly in the northof Vietnam) have been authorized to import automobile
components for the production of automobiles, and almost allof the imported automobile components come from China. 11
models of Chinese automobiles are assembled in the region.
There are a total of 25 automobile sales agents in North andSouthwest Vietnam, representing 9 Chinese branded vehicles(mainly trucks with a load capacity of 700 kilograms to 2.5
tons and medium-sized passenger cars with 8 to 29 seats).

Hardware & Fastener Components - no.62/2024

There are more than 200 automobile component
manufacturers in Vietnam, many of which are SMEs. The
Vietnamese government has proposed a target of having
at least 40% of automobile components produced locallyin 2005 and 60% in 2010, but the proportion by the endof 2023 only reached 33.1%, showing the supply chain ofVietnam's automotive industry is still not self-sufficient,even for joint-venture manufacturers, as high as 70.5% ofpassenger cars/large passenger cars or buses produced in
Vietnam still rely on imported components.
Many well-known manufacturers have operations in
Vietnam that produce automotive components, such as
Japanese Denso, GS (batteries supplier), Sanyo, Yokohama,and Korean Kymbo, which mainly manufacture plastics,
rubber parts, connector parts, screws, gas pedal or other metalmachined parts. The development of Vietnam's automotive
and components industry is mainly characterized by several
phenomena. The first is its weak research capabilities and themetallurgy, materials, electronics, chemicals, machinery andother industries highly related to the automobile industry are
underdeveloped, so most rubber/plastic, body panels and tires
and other components, and main key components like engines,
transmissions (MT/AT), brake servo systems, etc. still rely on
imports, the second is the lack of senior technicians and R&D
capabilities, and the third is the lack of after-sales service,
market research, study & info collection capabilities, and thetransportation infrastructure is incomplete compared to other
ASEAN countries (e.g., Thailand, Malaysia,
Indonesia, etc.).
Vietnam's automotive and components
industry is searching for development
strategies. In recent years, Vietnam has been
actively expanding export business for some
automotive components by virtue of theadvantages of cheap labor, etc. Due to thestagnation of Vietnam's domestic demand,
the automotive and its related components
industry has not been able to develop
smoothly. However, with the emergenceof the ASEAN countries, Vietnam has
been regarded as a production and exportbase for exporting to ASEAN countries
or Japan, and the number of related
automotive components manufacturers has

090 惠達雜誌

Unit: Vehicle

increased significantly, though a higher proportion is engaged in the
manufacture of low value-added plastic components.
Vietnam's automotive component manufacturers can only produce
simple parts, mainly rear-view mirrors, seat cushions, batteries, etc.,
whose added value is low and most of them have not reached an
economic scale. Vietnam's automotive component manufacturers,
due to the fact that the local motorcycle industry is moredeveloped and the market size is larger, are mainly engaged in
the manufacturing of motorcycle components, supplemented byautomotive components. Under the above development, most key
components rely on imports, but due to the impact of the increase inimport tariffs, the sales price of automobiles remains high, and the vast
majority of foreign-invested manufacturers do not conduct R&D andproduction in Vietnam, resulting in the slow progress of technology
transfer.

IV. Vietnam's Automobile and Component
Production and Sales
According to the statistics of Vietnam Automobile Manufacturers
Association (VAMA), due to the weak manufacturing capacity ofVietnam's automobile industry caused by the prolonged civil war, there
are 13 automobile joint-venture factories, which mainly import bulk
parts in the form of full-knockdown and semi-knockdown (SKD). Mostof them import chassis from China, S. Korea, and the Soviet Union.
According to MarkLines statistics, the automobile sales of Vietnam
in 2023 reached 276,000 units, the sales of Hyundai Thanh Cong
Vietnam (HTCV), a local corporation of Hyundai Motor not included
in VAMA, were 20,000 units, and the total sales were 296,000 units(including 61,000 passenger cars of all types, 153,000 MPV and
SUV), 20,000 pick-up trucks and vans, 34,000 trucks, and 0.8 million
buses & large trucks, etc. Figure 2 is the sales volume of various
types of vehicles in 2023 in Vietnam. Figure 3 is a comparison of themarket share of passenger cars of Vietnam's leading car manufacturers
in 2023, including the sales and share of Toyota (21,000 units, 34.2%),
Mazda (12,000 units, 19.2%), Honda (11,000 units, 18.2%), Hyundai
Group (0.8 million, 13.5%) and Mitsubishi (0.5 million, 8.2%). These
top 5 passenger car manufacturers accounted for 93.3% of the total.
Figure 4 shows the forecast for the Vietnamese automobile market.
With the car sales in 2023 totaling 276,000 units, it is forecast thatin 2024 Vietnam's economic growth will continue to increase thedomestic demand and the automobile market will reach 328,000 units.

Figure 2. Sales of Various Types of Vehicles in Vietnam in 2023

160,000
140,000
120,000
100,000
80,00060,00040,00020,0000
Passenger cars

MPV+SUVPickUp+Van

TrucksBuses &
large trucks

Source：MarkLines; ITRI IEK (2024/04)

40,000
20,0000
Passenger cars

MPV+SUVPickUp+Vanlarge trucks

Figure 3. The Market Share of Passenger Cars ofVietnam's Leading Manufacturers in 2023
Others, 6.7%

40
Unit:
10,000vehiclesMitsubishi , 8.2%

Honda , 18.2%

Honda , 18.2%
Buses &

Trucks

30

40

Unit:
10,000Figure 4.30
The Forecast for the Vietnamese Automobile Market
vehicles

40
20
Unit:
10,000vehicles0

10

Passengercars
0
Car sales

100
Honda , 18.2%

30
10
20

Toyota , 34.2%

20

Hyundai,13.5%

2020

Passenger Mazda,
12.3
cars
19.2%
Car sales
28.4

Source: MarkLines; ITRI IEK (2024/04)

Mazda,
Industry 19.2%
Focus
>>

Mazda,
19.2%

2021 Passenger
2022
cars
11.4 Car sales
10.9
27.7

2020

2021

2022

2023

2024(e)

10.9

6.1

11.7

12.3

11.4

2020
28.4

2021
27.7

2023
12.3

2024(e) 10.9
11.4

6.1

11.7

28.46.1

27.711.7

27.6

32.8

27.6

32.8

35.8

2022 35.8 2023 27.62024(e)35.8

32.8

Source: MarkLines; ITRI IEK (2024/04)

3,000

Unit: Million USD

2,500

3,000 Automotive Components
Unit: &
Million
USD
Figure 5. The Forecast of Import
ExportValue of Vietnam's

Unit:
10,000vehicles

30

2,000

2,500

3,000

Unit: Million USD

2,0001,500

2,500

1,5001,000

2,000

20

1,000 500

1,500

500

1,000

10

0

500

Automobile component export value

0

2020

Passengercars
Car sales

2021

12.3

11.4

28.4

27.7

Source: Global Trade Atlas;
ITRI IEK(2024/04)

2022

2023

2020 component
2021 import 2022
Automotive
value
Automotive component import value
component11.7
export value
1,263
1,511
1,587
10.9Automobile
6.1
Exportgrowthrate
Export growth ratecomponent32.8
import value
1,858
2,109
2,238
35.8Automotive
27.6
Importrate
Import growth
growth rate
Export growth rate
-8.9%
19.6%
5.0%
Import growth rate

3,000

Unit: Million USD

2024(e)Automobile
component export value
0

-6.6%

13.5%

6.1%

0
2020

2020
1,263

2021

25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
2021-5.0%
2022-10.0%
1,511
1,587-15.0%

1,263
1,511
2023(e)1,858 2024(f) 2,109
1,858
2,109
2,238
1,727
1,763
-8.9%-8.9% 19.6% 19.6%
5.0%
2,397
2,469
-6.6%-6.6% 13.5% 13.5%
6.1%
8.8%
2.1%

7.1%

2022

2023(e

1,587

1,727

2,238

2,397

5.0%
8.8%

8.8%
2.1%

6.1%
7.1%

7.1%
3.0%

2023(e)
1,727

2024(

1,763

2,397

2,469

3.0%

25.0%

Vietnam's automobile2,500
sales price is 20% higher than those
20.0%
15.0%
of other ASEAN countries.
In addition to the depreciation
2,000
Figure 10.0%
6. Vietnam's Main Import Origins and Shareof Vietnamese dong in 1,500
recent years, the main reason for this
5.0%of Automobile
Components in 2023
Others, 8.1%
0.0%
difference is its low capacity,with most of the assembly lines
1,000
Germany, 5.6%
Others,8.1%-5.0%
S. Korea, 28.1%
having a capacity of less than
500 50%. Coupled with the high taxes
Others, 8.1%
-10.0%
Germany,
5.6%(including luxury tax) and 0other factors, Vietnam's
automobile-15.0%
Germany, 5.6%
S. Korea, 28.1%
2020
2021
2022
2023(e)2024(f)S. 14.4%
Korea, 28.1%
Thailand,component production and assembly is not very profitable, exports
Automobile component export value
1,263
1,511
1,587
1,727
1,763
are not competitive, and it is difficult to absorb investments,
Automotive component import value
1,858
2,109Thailand,2,238
2,397
2,469 Thailand, 14.4%
14.4%
and the high tax system has also limited the development ofExport growth rate
-8.9%
19.6%
5.0%
8.8%
2.1%
Vietnam's automobile industry to a certain extent. Most automotive
Import growth rate
-6.6%
13.5%
6.1%
7.1%
3.0%
component manufacturers are lagging behind in terms of
China,
technology, hardware and software equipment compared to otherJapan, 25.3%
18.5%
ASEAN countries, and because Vietnam's automotive market
China,otheris relatively small compared to Thailand, Malaysia andJapan, 25.3%China,
18.5%
Japan, 25.3%
18.5%
countries, resulting in a low willingness of international component
manufacturers to enter Vietnam, and the related manufacturing
Source: Global Trade Atlas; ITRI IEK(2024/04)
technologies have not been able to introduce or drive the
Others, 22.9%
Others, 8.1%
developmentof the local automotive and component industries.
Germany, 5.6%
S. Korea, 28.1%
In 2023, Vietnam's auto component export was valued
Japan, 34.3%
value22.9%
of Vietnam's
Figure 5 is the forecast of import and exportOthers,
at US$1.73 billion, up 8.8% from 2022.
The trade war
Others, 22.9%
automotive
components(HS8708 category), Vietnam's automotive
Thailand,
14.4%
between China and the U.S. has led to some manufacturers
component import in 2013 was valued at 2.40 billion USD, an
S. Korea, 5.9% Japan, 34.3%
activelysetting plants in Vietnam. Coupled with Vietnam's
increase of 7.1% from 2022, which shows the value of imports issigning of trade agreements with many countries, Japan,
the number
34.3%
Thailand, 7.8%
greater than that of exports, and it is predicted
that, with Vietnam's
S. Korea, 5.9%of auto components made in Vietnam and exported frompolitical and economic stabilization in 2024 and the increase in the
Vietnam has increased, and the export
value is forecast to be
China ,
S. Korea, 5.9%
domestic marketChina,
demand, the value ofJapan,
imports
will grow to 2.47
Thailand,
13.9%
US$1.76billion2023. Vietnam's main
25.3% 7.8%
USA,
15.2% in 2024, up 2.1% frombillion USD, an 18.5%
increase of 3.0% from 2023. In 2023, the major
automotive component export destinations in 2023 were Japan
China,
import origins of Vietnam's automobile components were S. Korea
Thailand,
7.8%(34.3%),
China(13.9%), the U.S. (15.2%), Thailand (7.8%),
13.9%
USA, 15.2%(28.1%), Japan (25.3%), China (18.5%), Thailand(14.4%) andand S. Korea (5.9%), all of which account for 77.1% as shown
Germany (5.6%), all of which account for 91.9% of the total, as
China ,
in Figure 7.
13.9%
USA, 15.2%
shown in Figure 6.
Others, 22.9%

惠達雜誌Japan, 34.3%

Hardware & Fastener Components - no.62/2024

40

091

Industry Focus >>China,
18.5%

Japan, 25.3%

Figure 7. Vietnam's Main Auto Component Export
Destinations and Percentages in 2023
Others, 22.9%

Japan, 34.3%

S. Korea, 5.9%
Thailand, 7.8%

V. Conclusions and Suggestions
Although Vietnam's domestic automobile demand market is
not large, Vietnam's economic growth rate has been maintained at
6.5-7.0% in recent years. It is expected that the purchasing powerof Vietnamese people will increase rapidly, and the demand
for automobile components will continue to grow. Moreover,according to Vietnam’s policy of encouraging domestic car
manufacturing, manufacturers investing in Vietnam may be able
to respond to the increasing demand for automobile components
and obtain relevant (investment or tax) incentives.

Vietnam is a member of ASEAN and has signed FTA withmany countries, so it enjoys zero tariff for exporting automotive
USA, 15.2%
components to ASEAN countries, making its components morecost-competitive. As automobile sales in advanced countries
Source: Global Trade Atlas; ITRI IEK (2024/04)
in Europe, the U.S., and Japan are nearing saturation and thedemand is slowing down, the emerging ASEAN countries areabout to become the world's 4th largest automobile market, so there is a promising prospect of the demand for automotive
components and the market development. Taiwan has invested in more than 10 automobile and motorcycle component
factories in Vietnam, but the scale of investment and production is not large, and most of them mainly produce motorcycle
components, supplemented by automobile components. Taiwanese automotive industry is characterized by high precisionand cost competitiveness in the manufacturing of stamping parts and fasteners. Its automotive components such as electricalsystems, braking system components, aluminum alloy wheels, automotive wiring harnesses, brake pads, and lamps,
etc. also have gained an important position in the world, and may be able to fill in the gap in Vietnam's
automotive component supply chain. It is recommended that Taiwanese manufacturers deploy in the
Vietnamese market ASAP in order to seize business opportunities.
China ,
13.9%

Hardware & Fastener Components - no.62/2024

Copyright owned by Fastener World / Article by James Hsiao

092 惠達雜誌