HANOI, Vietnam — Vietnam is looking to small MPVs as a way to grab a foothold in auto production and exports in its region. The government is now considering new automotive regulations aimed at developing a strategic national vehicle model in preparation for lower import duties under the Association of Southeast Asian Nations' free trade agreement (AFTA).
Vietnam has already committed to reducing import duties to between zero and 5 percent on all vehicles imported from ASEAN member states by 2018. This would open the market up to imports from countries with currently much higher economies of scale, such as Thailand, Indonesia and Malaysia.
Following individual consultations with local vehicle assemblers, the Ministry of Industry and Trade (MIT) last week submitted proposals for cabinet approval for incentives to be offered on six-to-nine-seat MPVs powered by gasoline engines of up to 1.5 liters.
The plan for offering incentives on MPVs has a longer-range aim. The MIT hopes to develop a mass domestic market for compact MPVs and to eventually tap into the rapid growth in demand for these models across the ASEAN region. The aim is to concentrate resources, including domestic buying power, in developing a strong industry niche with economies of scale approaching those of other major ASEAN countries.
The MIT said this type of vehicle fulfills key domestic consumer requirements in Vietnam, including versatility, low price and fuel efficiency. It says it has avoided any favoritism by choosing a vehicle that is not yet available locally. Tax holidays, duty-free machinery imports and favorable excise taxes are likely to be offered to make the plan work.
MPV sales currently account for 12 percent of the total vehicle market in Vietnam, at 10,921 units in the first 10 months of 2009. More than 85 percent of these, or 9,292 units, are locally assembled 2.0-liter Toyota Innovas. Most of the remainder are 1.8-liter Kia Carens.
Compact MPVs such as the Toyota Avanza, Daihatsu Xenia and the Suzuki APV are assembled and sold in relatively high volumes in Indonesia. The Honda Freed went into production earlier this year.
The MIT will likely initially seek to supply other left-hand-drive markets in the region, including the Philippines, Cambodia and Laos, rather than compete head-on with Indonesia in the right-hand drive market.
Inside Line says: Looks like an organized plan to move the country's industry forward. — Tony Pugliese
Add A Comment »