To import or manufacture? - That is car companies’ question

Experts warn that if all automobile joint ventures import cars to sell rather than manufacturing them, Vietnam will not have its own automobile industry.


Mercedes Benz Vietnam has announced it received a license to import cars for domestic consumption. Experts say this might ignite a new trend for existing automobile joint ventures to import cars to sell instead of investing in manufacturing.

Under WTO commitments, as of January 1, 2009, foreign enterprises and foreign invested enterprises will have the right to import and distribute cars on the domestic market. However, in mid 2007, several members of the Vietnam Automobile Manufacturers’ Association (VAMA) sought permission to import cars to sell domestically. Mercedes Benz Vietnam has become the first automobile joint venture able to import and sell their autos.

The next automobile joint venture to get permission might be Ford Vietnam and Toyota Vietnam, though their representatives did not respond to questions to this effect.

What the public is interested in now is not will automobile joint ventures will import cars, but when they will import cars. Joint ventures are rushing for permission because of the recent tax adjustments by the Ministry of Finance.

The ministry reduced import tax rates from 90% to 60% last year, which has made importing autos more profitable than manufacturing them. Analysts estimate that 25% of total cars (28,000) now in circulation were imported.

Automobile joint ventures have said many times that if the Government continues lowering the import tax and thus hampering their operations, they will shift to importing and distributing cars rather than manufacturing them.

Analysts say that once automobile joint ventures are allowed to import cars for domestic consumption, the domestic market will be flooded.

Luckily, Mercedes Benz Vietnam only distributes its Mercedes S500L, CLS350, R350L, ML350, ML500, SLK350, GL320CDI and GL450 models, but not its Maybach, Dodge and Chrysler subsidiary models as well, said director of an auto seller that specializes in importing European cars.

At the launching ceremony of MPV Chevrolet Vivant, General Director of GM-Daewoo Vietnam (Vidamco) Jung-In Kim, said his joint venture has not made any decisions yet, but if necessary, will import Chevrolets, Cadillacs, GMCs, Hummers, Saabs and Saturns.
Ford and Toyota, like GM Daewoo, will also bring many more models to Vietnam if they are allowed to import cars, including Ford’s Jaguar, the Aston Martin, Land Rover, Lincoln, Mercury, Volvo, or Toyota’s Lexus and Scion.

Automobile joint ventures have the advantages when compared to trading companies. They can sell cars at lower prices because they can import for less. Moreover, they can provide better post-sale services.

In latest news, sources say the Ministry of Finance is considering re-increasing the tax on imported cars from 60% to 63% or 70% in an effort to solve the traffic jam problem.

source: http://english.vietnamnet.vn/biz/2008/01/766379/