The auto industry does not shrink from many challenges

VCN - In the context of the import tax reduction roadmap being implemented when Vietnam participates in commitments in Free Trade Agreements, the pressure of competition on the Vietnamese automobile industry is also increasingly fierce. Therefore, in addition to tax and fee support, many breakthrough solutions and policies are needed to create a boost for the auto industry.
Auto industry steers strategy towards wider supply chains Auto industry steers strategy towards wider supply chains
Incentives for development of auto industry Incentives for development of auto industry
Vietnam’s auto industry needs deeper involvement in global supply: experts Vietnam’s auto industry needs deeper involvement in global supply: experts
                Speakers discussed at the Seminar. Photo: Quang Hung
Speakers discussed at the Seminar. Photo: Quang Hung

Challenges of competition

Seminar: "Vietnam's automobile industry implements the Free Trade Agreement: In what direction is it developing?", organized by Customs Magazine on May 24.

Overall assessment of the current situation of Vietnam's automobile industry, Dr. Le Huy Khoi, Deputy Director of the Institute of Industry and Trade Strategy and Policy Research (Ministry of Industry and Trade), said that in recent times Vietnamese automobile industry has certain development, especially after the Covid-19 epidemic. The year 2022 recorded record business results, however, in 2023 and entering 2024, the auto market is facing difficulties with a very rapid decline.

Commenting on the opportunities in the coming time when implementing Free Trade Agreements (FTAs), Mr. Le Huy Khoi said that the process of implementing FTAs ​​will bring many opportunities for the Vietnamese automobile industry, but also poses many challenges.

With the tax reduction roadmap, businesses will be able to access and import products easily and at lower costs, contributing to cutting production costs and increasing product competitiveness. However, this creates the pressure of competition on cars imported from abroad for the domestic market.

Sharing about the development of the automobile industry in recent times, Mr. Duong Ba Hai, Deputy Head of Export Tax and Import Tax Division - Department of Management and Supervision of Tax Policy, Fees and Charges (Ministry of Finance) said that Vietnam is an open economy, has joined 17 bilateral and multilateral agreements, including new generation FTAs ​​such as CPTTP, EVFTA, etc which are important agreements, helping businesses open market opening, market diversification, including automobile industry enterprises.

However, according to Mr. Duong Ba Hai, the market openness is very large, but Vietnam's automobile industry is mostly young, subject to a lot of competition from import enterprises, foreign enterprises, etc, at the same time it must still fully meet the requirements and high standards of labor and environment.

In the context of many challenges facing the young industry, the Ministry of Finance has accompanied businesses to overcome difficulties.

To promote domestic automobile manufacturing and assembly enterprises, protect the domestic automobile industry in the context that tariff barriers on imported cars are gradually being reduced according to international commitments of Vietnam in FTAs, the Ministry of Finance has submitted to the Government to promulgate Decree No. 125/2017/ND-CP dated November 16, 2017, which promulgates the Tax Incentive Program for importing automobile components for production, car assembly being applied for 5 years (from 2018 to the end of 2022). This program removes difficulties for businesses, ensuring adherence to the Automobile Industry Development Strategy.

Up to now, many large-scale automobile manufacturing enterprises with sufficient production capacity have participated in the Tax Incentive Program and the Vietnamese automobile industry has developed quite rapidly in recent years. Domestic manufacturing and assembly enterprises have initially affirmed their role and position in the domestic automobile market and have developed faster and more sustainably.

In parallel with the tax incentive policy for domestic manufacturing and assembly enterprises, the Ministry of Finance has coordinated with ministries and branches to submit to the Government a tax incentive program for the automobile support industry to implement for the 5-year period from 2020 to 2024 (stipulated in Decree No. 57/2020/ND-CP). Accordingly, raw materials, supplies, and components that cannot be produced domestically can be imported to produce products on the List of supporting industrial products prioritized for development of the automobile manufacturing and assembly industry according to Decree No. Decision No. 111/2015/ND-CP dated November 3, 2015 of the Government to supply components and spare parts for automobile manufacturing and assembling enterprises will be eligible for 0% preferential import tax.

“The automobile supporting industry tax incentive program has been effective through import tax refunds, contributing to reducing input material costs, helping to reduce product costs, and improving the competitiveness of businesses in the market', Mr. Duong Ba Hai informed and said that, specifically regarding import tax, the Ministry of Finance always grasps the market situation to gradually bring preferential policies to life, ensuring difficulties to be removed for the development of the automobile industry and automobile support industry.

In addition, special consumption tax policies, registration fees, and other tax incentive policies for automobile manufacturing projects, etc have had a positive impact on the economy in general and the automobile industry in particular, making an important contribution to the implementation of the Strategy for developing the domestic automobile industry; Encourage automobile manufacturing and assembly enterprises to invest in expanding production, increase localization rate and deeply participate in the global supply chain.

From a business perspective, Ms. Nguyen Anh Tuyet, Head of the Customs Subcommittee of the Vietnam Automobile Manufacturers Association (VAMA), said that among the FTAs ​​that Vietnam has participated in and signed, many FTAs ​​have committed to on CBU cars and has a roadmap to reduce import tax on CBU cars to 0%, typically the ASEAN Trade in Goods Agreement (ATIGA) 0% from 2018; Trade Agreement between Vietnam and the UK, EU (UK/EVFTA) 0% from 2028; Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) 0% from 2027, etc.

“This is a huge opportunity for the auto market to diversify products and bring many choices to Vietnamese consumers. In fact, immediately after committing to eliminate import and export taxes from ASEAN countries, many domestically produced products could not compete with products from ASEAN countries such as Thailand and Indonesia and were replaced by imported products," Ms. Tuyet stated.

With the implementation of EVFTA commitments, import tax on CBU cars from the EU to Vietnam will decrease by about 6.4%/year, continuously for 10 years. In 2024, the applicable import tax is 38.1%. It is expected that by 2030, the import tax on CBU cars from the EU will be 0%.

This also puts increasing pressure on Vietnamese automobile manufacturing enterprises to maintain production and maintain market share in existing segments.

How to welcome opportunities and overcome challenges?

According to Mr. Le Huy Khoi, with quite strong commitments in the field of automotive products, components, and spare parts, especially commitments on tariffs, EVFTA is expected to have a strong impact on the Vietnamese automobile industry when enforce commitments. The auto industry has the opportunity to import quality, high-tech auto products, spare parts, and components from the EU at lower prices, contributing to cutting production costs and increasing product competitiveness; opportunity to take advantage of the long roadmap period (protection) to continue developing the domestic manufacturing and assembly industry before having to compete directly and fairly with EU competitors when the roadmap ends. Export opportunities for auto and motorbike spare parts and components that Vietnam has strengths in, and can become joint venture investment partners, or suppliers for EU investors coming to Vietnam to seek opportunities to exploit domestic and regional markets, etc.

However, from an export perspective, the EU market is a market with high standards, geographical distance is quite far from Vietnam, so export opportunities will be difficult to come true if businesses do not have enough capacity to participate in the supply network in the field of automobiles and motorbikes, and high competitiveness.

Besides, although the 7-10 year protection period is relatively long, if the Vietnamese automobile and motorbike industry continues to stagnate and lack initiative in improving competitiveness, there is a high risk of losing on the home course. Therefore, Vietnamese automobile industry enterprises need to carefully study EVFTA commitments, prepare conditions to take advantage of opportunities from the Agreement as well as be ready for a competitive future when the tax protection roadmap ends.

Joining hands to support the auto industry, the Customs agency also implemented many solutions to create favorable conditions for the import-export business community, including CBU car importers and businesses importing components and spare parts for automobile production and assembly.

Sharing at the seminar, Ms. Truong Binh An, Deputy Director of Hai Phong Customs Department, said that for businesses importing components, raw materials, and supplies to produce and assemble cars, automobile support industries under the Tax Incentive Program and the Automobile Support Industry Tax Incentive Program located in the management area, the unit's leaders always pay attention to directing the quick handling of related procedures such as registration procedures to participate in the Program, procedures for checking production facility conditions, customs declaration procedures, and tax refund procedures. This makes an important contribution to reducing procedure time and actively supporting production and business activities of the above enterprises.

Mr. Duong Ba Hai said that, in the context that Vietnam has participated in many FTAs, besides favorable opportunities, the domestic automobile industry is also facing many different challenges (the rate of production in water level is low, the market size is still small, the cost of manufacturing and assembling cars is high, traffic infrastructure still has many bottlenecks, etc), the formulation and implementation of policies to promote development The automobile industry in general and electrified cars in particular in the coming time need to be studied carefully and thoroughly, ensuring adherence to the Party and State's policy directions, in accordance with international practices and the fact that Vietnam is joining FTAs.

Mr. Le Huy Khoi also said, the orientation of the Vietnam Automobile Industry Development Strategy to 2030, vision to 2045 is determined, to 2030: Developing Vietnam's Automobile Industry on the basis of preservation of goals and overall socio-economic efficiency; Aims to be approachable and proactive in manufacturing technology for machine parts; Meet environmental requirements and standards and trends in economical and green energy use, enhance supply capacity for domestic consumption needs and participate in the global automotive value chain, has great export value.

By 2045, developing the automobile industry will not only ensure the goal of contributing and improving overall socio-economic efficiency but also meet new requirements and pioneer in environmental protection and completely switch to manufacturing and supplying automobile products using electricity, green energy, and new energy; move towards being fully proactive in engine production for most vehicle types; fully meet domestic consumption needs and deeply participate in the global automobile industry value chain; Expand and increase turnover and added value in exports.

By Ngoc Linh/ Phuong Linh

Related News

Quang Ninh Customs considers businesses as partners for cooperation and development

Quang Ninh Customs considers businesses as partners for cooperation and development

VCN - Businesses also noted quick and timely access to customs legal documents; regularly receive support to solve difficulties from the Customs authorities.
Businesses highly appreciate support of Lang Son Customs

Businesses highly appreciate support of Lang Son Customs

VCN – The working group of the Customs Reform and Modernization Board (under the General Department of Vietnam Customs) held a workshop on survey and evaluation of actual implementation of the development of Customs-Business partnerships (2014-2024) at Lang Son Customs Department.
Imposing and raising special consumption tax contributing to change consumption behavior

Imposing and raising special consumption tax contributing to change consumption behavior

VCN - At the Workshop on Comments on Completing the Revised Law on Special Consumption Tax (SCT) organized by the Vietnam Confederation of Commerce and Industry (VCCI) on July 11, many experts and businesses contributed their opinions to clarify the importance and impact of the revised special consumption tax law, which emphasizes the addition of taxable areas or tax increases to change society's consumption behavior.
Improving the competitiveness of businesses is an important factor

Improving the competitiveness of businesses is an important factor

VCN - Local competitiveness is not only based on economic management capacity, the favorable and friendly business environment and efforts to improve administrative reform efforts of provincial and city governments (PCI) but also relies on the competitiveness of local businesses.

Latest News

HCM City annual international travel expo in September

HCM City annual international travel expo in September

The 18th International Travel Expo HCM City (ITE HCMC) will be held from September 5 to 7, according to the city Department of Tourism.
Đồng Nai

Đồng Nai's key export item hopes for recovery

Over the past six months of this year, the province’s footwear exports topped over $2.2 billion, up 8.2 per cent year-on-year. Many footwear producers in the province have won orders from many international brands such as Nike, Adidas, Reebok and Puma.
Rice exports to set record turnover of 5 billion USD in 2024

Rice exports to set record turnover of 5 billion USD in 2024

Rice exports could bring in a record turnover of 5 billion USD this year if the pace of shipment is maintained like at present, according to Vu Tuan Anh, CEO of GLE company, a rice exporter.
4 export markets of tens of billions of dollars

4 export markets of tens of billions of dollars

VCN - By the end of June 2024, the country has four markets achieving export turnover of US$10 billion or more, according to the General Department of Customs.

More News

Difficult for phones to regain No. 1 position in exports

Difficult for phones to regain No. 1 position in exports

VCN - After many years holding the number 1 position in our country's exports, recently, phones and components have lost their position
Indonesia licenses certificates of lobster cultivation for three Vietnamese companies

Indonesia licenses certificates of lobster cultivation for three Vietnamese companies

Three out of the five Vietnamese businesses, which have formed limited liability companies in Indonesia, have been verified and received certificates of lobster cultivation from the Directorate General of Aquaculture, according to Indonesia’s Ministry of Maritime Affairs and Fisheries.
Vietnamese spend nearly 150 trillion VND on online shopping

Vietnamese spend nearly 150 trillion VND on online shopping

Vietnamese consumers spent 143.9 trillion (5.68 billion USD) buying 1.53 million items on five e-commerce platforms in the first half of this year, representing a rise of 54.91% and 65.55% over the same period last year, respectively, according market analysis firm Metric.
Four tens of billion USD export markets

Four tens of billion USD export markets

VCN - According to General Department of Vietnam Customs, by the end of June 2024, Vietnam has four markets achieve export turnover of US$ 10 billion.
Successful digital transformation solutions for wood industry enterprises

Successful digital transformation solutions for wood industry enterprises

VCN - Refraining from rushing, implementing steps gradually, and maintaining a clear vision are the recommendations that experts give to wood industry enterprises for successful digital transformation.
Vietnamese lychee sold well at Costco stores in Australia

Vietnamese lychee sold well at Costco stores in Australia

Lychee, one of Vietnam’s major export fruits, has been sold well at Costco stores in Western Australia and South Australia, according to the Vietnam Trade Office in Australia.
Durian exports forecast to top 3 billion USD in 2024

Durian exports forecast to top 3 billion USD in 2024

Durian exports may surpass 3 billion USD this year, according to Dang Phuc Nguyen, General Secretary of the Vietnam Vegetable and Fruit Association (Vinafruit).
FTA - support to promote pangasius export

FTA - support to promote pangasius export

VCN - The implementation of FTAs ​​always creates favorable conditions for businesses to expand and diversify markets, bringing Vietnamese seafood, including pangasius, to participate deeperly into the global production and supply chain.
Vietnam - France trade reached nearly US$2.5 billion in the first half of the year

Vietnam - France trade reached nearly US$2.5 billion in the first half of the year

VCN - France is Vietnam's leading trade partner in Europe with bilateral turnover reaching billions of US$/year.
Read More

Your care

Latest Most read
HCM City annual international travel expo in September

HCM City annual international travel expo in September

The 18th International Travel Expo HCM City (ITE HCMC) will be held from September 5 to 7, according to the city Department of Tourism.
Đồng Nai

Đồng Nai's key export item hopes for recovery

Over the past six months of this year, the province’s footwear exports topped over $2.2 billion, up 8.2 per cent year-on-year. Many footwear producers in the province have won orders from many international brands such as Nike, Adidas, Reebok and Puma.
Rice exports to set record turnover of 5 billion USD in 2024

Rice exports to set record turnover of 5 billion USD in 2024

Rice exports could bring in a record turnover of 5 billion USD this year if the pace of shipment is maintained like at present, according to Vu Tuan Anh, CEO of GLE company, a rice exporter.
4 export markets of tens of billions of dollars

4 export markets of tens of billions of dollars

VCN - By the end of June 2024, the country has four markets achieving export turnover of US$10 billion or more, according to the General Department of Customs.
Difficult for phones to regain No. 1 position in exports

Difficult for phones to regain No. 1 position in exports

VCN - After many years holding the number 1 position in our country's exports, recently, phones and components have lost their position
Mobile Version