Automobile localization: rapid development from internal strength

VCN - Enjoying many investment incentives for many years, FDI enterprises have failed to fulfill their commitments on the localization rate in automobile production. It was thought that Vietnam would not have an automobile manufacturing industry, depending on imports and stopping at assembly. However, in a short time, with their internal strength, determination and mettle, domestic enterprises have initially affirmed their role and position in the automobile market, with strong development in both quantity and quality.
Quang Nam Customs completes procedures to refund nearly VND 1,200 billion in taxes to businesses Quang Nam Customs completes procedures to refund nearly VND 1,200 billion in taxes to businesses
Revising SCT on automobiles must ensure harmony of benefits Revising SCT on automobiles must ensure harmony of benefits
Vietnam trade mission in Germany seeks cooperation in automobile industry Vietnam trade mission in Germany seeks cooperation in automobile industry
Domestic enterprises have initially affirmed their role and position in the automobile market, with strong development in both quantity and quality. Photo: H.P
Domestic enterprises have initially affirmed their role and position in the automobile market, with strong development in both quantity and quality. Photo: H.P

Rocket development

Since the 2000s, in the Automobile Industry Development Strategy, the Government has had many incentives to encourage the development of auto parts and components production in Vietnam, especially FDI enterprises with many incentives on investment, taxes, etc.

However, after a long period of more than 20 years of development, the results have not been as expected. A report from the Ministry of Industry and Trade said: from 2014 to 2021, the domestic rate of 9-seat cars only reached an average of 12-20% (much lower than the target of 30-40% in 2020).

Fortunately, in the past three years, the Vietnam’s automobile manufacturing industry, with the rise and leadership of domestic enterprises such as Truong Hai Automobile Joint Stock Company (Thaco), Thanh Cong Group (TC Motor), VinFast... has seen rapid and impressive development.

For many consecutive years, the Top 3 best-selling products in the Vietnamese automobile market have always included products manufactured and distributed by Thaco and TC Motor. These enterprises have also quickly risen to dominate the market share, taking the leading position.

Not only selling products domestically, in 2020, Thaco exported Kia Grand Carnival passenger cars to Thailand, the largest automobile manufacturing center in Southeast Asia (an order of nearly 600 cars). In 2023, Thaco exported more than 2,400 cars (revenue of more than US$10 million).

In 2024, TC Motor also exported the Palisade model (manufactured in Ninh Binh) to Thailand with a Regional Value Content (RVC) ratio of over 40%, eligible for tariff incentives from the ASEAN Free Trade Agreement (AFTA).

Especially the development of VinFast with the historical milestone in 2022 of exporting a batch of 999 electric cars to the US, one of the most demanding markets in the world. And in 2024 (after 5 years of operation), VinFast surpassed all international car brands, becoming the best-selling car brand in the Vietnamese market with 9,300 cars in September.

In the first 9 months, VinFast delivered 44,260 electric cars, an increase of 108% year-on-year. In the third quarter alone, VinFast delivered 21,912 vehicles, up 66% compared to the second quarter and 116% compared to the same period last year. It is estimated that in 2024, VinFast will deliver 80,000 vehicles, a record number that no other car company has achieved.

Self-reliance

It can be said that the rapid emergence and rise of Vietnamese enterprises such as Thaco, TC Motor or VinFast have changed the Vietnamese automobile industry. Enterprises have quickly affirmed their role and position in the domestic automobile market and have made strong progress in both quantity and quality.

"Self-reliance" is the solution that Thaco, the first automobile manufacturing and assembling enterprise in Vietnam, has chosen for development. Based on the resources and experience in the mechanical and supporting industry sectors, along with the trend of investment shifting in the global supply chain in the context of integration, Thaco has restructured and established the Mechanical and Supporting Industry Corporation - Thaco Industries, including a complex of 19 mechanical and spare parts factories, an R&D Center and a Testing Center in Chu Lai.

Thanks to that, Thaco has proactively produced many types of auto parts and components, such as car seats, interior components, glass, wires, springs; manufacturing molds, air conditioners for passenger cars, trucks, buses; plastic components; car bodies, semi-trailers, bumpers, wires, seat covers, seat frames, mechanical components, plastic - composite components and other industrial equipment groups.

Not only "taking care of itself", Thaco supplies OEM components to many car and motorbike manufacturers in Vietnam such as: Hyundai, Toyota, Isuzu, Piaggio and FDI enterprises such as: General Electric, Doosan Vina, Makitech, Amann and exports to key markets such as: the USA, Australia, the UK, Italy, Russia, Canada, Sweden, Finland, Korea, Japan ... reached US$160 million in revenue, with the goal of reaching US$1 billion by 2025.

Currently, this group is the largest component and spare part manufacturer in Vietnam with nearly 20 centers and mechanical manufacturing factories in the industrial center in Quang Nam.

Mr. Le Ngoc Anh, Director of VinFast Vietnam Factory, said: since its establishment, this Vietnamese brand has determined not to follow the conventional assembly path but to become a real automobile manufacturer. Because only then this way can strongly promote the development of domestic supporting enterprises, while reducing dependence on imported components.

As a result, during a recent visit to VinFast's factory, domestic experts and media witnessed the production process of parts and spare parts for electric vehicle models which are currently on the market. Many important details that make up an electric car, from the body to the engine, are being produced here.

Following the direction of "self-reliance" in investing and owning stamping, welding, assembly and engine manufacturing factories, with technology lines imported from many big names from Germany, Austria, Korea, the localization rate of VinFast electric vehicles has reached more than 60%, including important details such as body shell, engine, roof, shock absorbers.

Mr. Le Ngoc Anh also “revealed”: VinFast also built a clear roadmap to increase the localization rate from over 60% currently to 84% by 2026 through the domestic production and supply of additional details such as: Car seats, electric wires, car lights, car rims, brake - steering systems, interior and exterior components, mirrors...And especially, VinFast produces electric batteries (battery cells), one of the most valuable components in electric cars (currently VinFast only packages batteries at two factories in Hai Phong and Ha Tinh, battery cells are still imported from other manufacturers abroad).

Currently, the battery pack has a fairly high value in electric vehicles. For example, the VinFast VF 3 cost VND240 million if the battery is rent, or VND322 million if the battery is sold, meaning the battery price is about VND80 million, equivalent to 25% of the car price. Not to mention sales costs and taxes, the battery pack is worth about 30% of the cost of a VF 3 electric car. If the battery source can be self-sufficient, the localization rate of will increase sharply.

Cooperation is a must

Vietnam has changed a lot in terms of population size, economic growth and growth quality. Therefore, the scale, products and consumption market of domestic automobiles have also changed a lot. The "automotive" phase is increasing rapidly on a large scale and the increasing trend is forecast to continue in the coming time, which will be the driving force contributing to promoting the automobile industry's supporting industry to operate more strongly.

In addition to the future market potential, another advantage of Vietnam in developing the domestic supply chain is that it owns domestic assembly and manufacturing enterprises with leading sales such as Thaco, VinFast, TC Motor... These enterprises will have more motivation to develop the supporting industry than foreign companies that already had a complete ecosystem before investing in Vietnam.

In particular, these "big guys" will create a driving force to lead purely Vietnamese suppliers.

Established in 2007, Vietnam CNC & Technology Application JSC focuses on industrial machines, automatic mechanics, and provides some indirect equipment in the manufacturing plants of Honda and Toyota Vietnam. However, for a long time, CNC VINA's components and spare parts could not "enter" the assembly chain of a car.

In 2017, CNC VINA had the opportunity to become an indirect equipment supplier for VinFast, the first purely Vietnamese car company. And five years later, the company was assigned to manufacture and supply the fork, a part of the suspension system, and then to process the battery case and electric motor when VinFast switched from gasoline to electric cars.

It can be said that the opportunity to enter the supply chain of the automobile assembly industry like CNC Vina for Vietnamese enterprises is much more open thanks to leading enterprises such as VinFast, Thaco, TC Motor...

According to VinFast's representative, the company will coordinate with existing partners, combine with technology transfer and call for investment. Accordingly, the company will take advantage of the existing network of supporting enterprises to optimize domestic supply, reducing dependence on imports.

VinFast will also work with companies specializing in designing and manufacturing complex components, and requiring world-leading intelligence and technology to transfer technology to VinFast's current partner companies in Vietnam.

The company also guarantees output for Vietnamese enterprises in its supply chain. Currently, at VinFast's factory complex, more than 30% of the area in the campus is reserved for developing supporting industrial parks.

It can be seen that the supporting industry for the automobile industry has shifted towards increasing the proportion of enterprises operating in the field of manufacturing equipment, components, spare parts and reducing the proportion of enterprises operating in the fields of assembling, manufacturing car bodies and trunks.

However, according to the Ministry of Industry and Trade, the number of domestic manufacturers and suppliers for the automobile industry is still quite modest. Enterprises in Vietnam have only produced and processed less than 300 parts (compared to about 30,000 parts that make up a car).

In addition, the technology content and value of these parts and components are not high as they are only bulky components that require a lot of labor. Important parts of the engine, transmission system, gearbox, safety system, electronic system on the car, especially semiconductor chips, are not yet produced by domestic enterprises and must rely heavily on imports.

Therefore, in addition to the efforts of enterprises, many experts believe that it is necessary to soon have solutions and policies to support the development of the domestic automobile manufacturing and assembly industry, mechanical engineering industry and automobile support industry.

In addition, the automobile industry also needs strong enough policies to solve problems such as high investment costs while the output is small and there is no high-quality materials industry... to quickly narrow the cost gap, expand the domestic component network, and promote the development of the supporting industry in the future.

By Nguyen Ha/ Huyen Trang

Related News

Complying with regulations of each market for smooth fruit and vegetable exports

Complying with regulations of each market for smooth fruit and vegetable exports

VCN - According to Mr. Dang Phuc Nguyen (photo), General Secretary of the Vietnam Fruit and Vegetable Association (Vinafruit), with the development momentum and increasing consumption demand from the Chinese market, the Vietnamese fruit and vegetable industry is setting new records and is expected to reach an export turnover of US $10 billion by 2030. With great potential and advantages in developing agricultural products, Vietnam has been affirming its position as one of the world's leading agricultural exporters.
Request for price management and stabilization, avoiding unusual fluctuations during Tet 2025

Request for price management and stabilization, avoiding unusual fluctuations during Tet 2025

VCN - Minister of Finance Nguyen Van Thang has just signed and issued Directive No. 05/CT-BTC on strengthening the price management, operation and stabilization during the Lunar New Year 2025.
Six export commodity groups see billion-dollar growth

Six export commodity groups see billion-dollar growth

From the beginning of the year to December 15, there were six key export commodity groups with an increase in turnover of US$1 billion or more, according to the latest statistics of the General Department of Customs.
Paving the way for Vietnamese agricultural products in China

Paving the way for Vietnamese agricultural products in China

VCN - The signing of protocols between the Ministry of Agriculture and Rural Development of Vietnam and the General Administration of Customs of China has created momentum for many domestic agricultural products. In 2025 and the coming years, participating in cross-border e-commerce channels is considered a potential direction for domestic enterprises to directly approach Chinese consumers.

Latest News

Monetary policy is a key factor for economic stability and growth

Monetary policy is a key factor for economic stability and growth

VCN – Vietnam’s economy is forecast to grow by 6.7% in 2025, Standard Chartered Bank reported.
Việt Nam commits to being safe, attractive destination for investors

Việt Nam commits to being safe, attractive destination for investors

The Deputy Prime Minister said from an underdeveloped economy, devastated by war, Việt Nam has risen to become the 33rd largest economy in the world with the size of the economy increasing about 60 times compared to the period before renewal.
Minister of Planning and Investment outlines six strategies to boost Việt Nam’s private sector

Minister of Planning and Investment outlines six strategies to boost Việt Nam’s private sector

Dũng’s message to Việt Nam’s business community was clear: the private sector must continue to evolve and innovate to maintain its role as a key driver of economic development in the face of new global challenges.
Positive economy growth forecast in 2025, but caution remains

Positive economy growth forecast in 2025, but caution remains

Growth is expected to moderate from 7.5 per cent year-on-year in H1 to 6.1 per cent in H2, driven by increased business activity and sustained foreign investment.

More News

Labour market to see changes in key industries

Labour market to see changes in key industries

It is anticipated that the technology, renewable energy and logistics sectors would continue to expand rapidly in 2025.
Prime Minister warns of possible global trade war, pushes for preparation

Prime Minister warns of possible global trade war, pushes for preparation

The Government leader warns of a possibility of a trade war that may disrupt the global supply chain.
Positive economic indicators recorded in early 2025: Gov

Positive economic indicators recorded in early 2025: Gov't spokesperson

Trade remained smooth, with total import-export turnover estimated at $63.15 billion, down 10.5 per cent from the previous month and 3.5 per cent year-on-year.
General Secretary urges immediate return to work after Tết

General Secretary urges immediate return to work after Tết

Party General Secretary Tô Lâm praised efforts to ensure a well-organised holiday, but stressed the need for authorities and businesses to return to work promptly. He warned against extended celebrations and called for full focus on meeting February and first-quarter deadlines.
Government holds gathering to celebrate Party’s 95th anniversary, Lunar New Year

Government holds gathering to celebrate Party’s 95th anniversary, Lunar New Year

PM Phạm Minh Chính expressed his hope for continued support from the Party Central Committee, its Politburo and Secretariat, current and former leaders, the National Asembly, and the Việt Nam Fatherland Front for the Government to fulfil its tasks, creating momentum for the whole country to make development breakthrough and enter the era of the nation’s rise.
Việt Nam’s manufacturing PMI slips into contraction in January

Việt Nam’s manufacturing PMI slips into contraction in January

Business conditions in the Vietnamese manufacturing sector weakened in the first month of 2025 with drops in both output and new orders.
Party’s 95-year journey: Capitalising on great solidarity in era of nation’s rise

Party’s 95-year journey: Capitalising on great solidarity in era of nation’s rise

The past 95 years have formed a glorious and pride-worthy period for the Vietnamese people as they have gradually eliminated poverty and backwardness, steadily moving towards a wealthier and happier future.
Great opportunities for cooperation with Việt Nam in 2025: Malaysian Ambassador

Great opportunities for cooperation with Việt Nam in 2025: Malaysian Ambassador

Malaysian Ambassador to Việt Nam Dato’ Tan Yang Thai says he believes that 2025 will bring even greater opportunities for cooperation between the two countries in his recent interview with the Vietnam News Agency.
Structural reform, innovation to drive Việt Nam

Structural reform, innovation to drive Việt Nam's sustainable development: EuroCham chair

Bruno Jaspaert, chair of EuroCham Vietnam told the Vietnam News Agency in a recent interview that Việt Nam continued to stand out as a highly attractive destination for foreign investors, including those from Europe.
Read More

Your care

Latest Most read
Monetary policy is a key factor for economic stability and growth

Monetary policy is a key factor for economic stability and growth

VCN - Standard Chartered's report also forecasts Vietnam's economic growth at 7.5% in the first half of the year and at 6.1% in the second half of the year compared to the same period last year.
Việt Nam commits to being safe, attractive destination for investors

Việt Nam commits to being safe, attractive destination for investors

The Deputy Prime Minister said from an underdeveloped economy, devastated by war, Việt Nam has risen to become the 33rd largest economy in the world with the size of the economy increasing about 60 times compared to the period before renewal.
Minister of Planning and Investment outlines six strategies to boost Việt Nam’s private sector

Minister of Planning and Investment outlines six strategies to boost Việt Nam’s private sector

Dũng’s message to Việt Nam’s business community was clear: the private sector must continue to evolve and innovate to maintain its role as a key driver of economic development in the face of new global challenges.
Positive economy growth forecast in 2025, but caution remains

Positive economy growth forecast in 2025, but caution remains

Growth is expected to moderate from 7.5 per cent year-on-year in H1 to 6.1 per cent in H2, driven by increased business activity and sustained foreign investment.
Labour market to see changes in key industries

Labour market to see changes in key industries

It is anticipated that the technology, renewable energy and logistics sectors would continue to expand rapidly in 2025.
Mobile Version