VN’s automobile industry still faces challenges in implementing FTAs

HÀ NỘI —Việt Nam has made efforts to build a domestic automobile industry, replace imports, and eventually become an auto exporter. However, the young industry faces many challenges, especially in implementing free trade agreements (FTAs), according to the editor-in-chief of Customs Newspaper Vũ Thị Ánh Hồng. 

Hồng was speaking during a forum held by the newspaper to discuss how Việt Nam’s automobile industry is developing in light of the FTAs.

The government has issued various tax and fee incentives to support the development of a domestic car industry: 

• Zero per cent preferential import tax on components imported for domestic automobile production and assembly (2018-2027).
• Tax incentives for the automobile support industry (2020-2024) to ensure the supply of components. 
• Reduced special consumption tax rates for battery-powered vehicles compared to gasoline/diesel vehicles.
• Extended deadline for paying special consumption tax on domestically produced/assembled cars until the end of 2023. 
• 50% reduction in vehicle registration fees for domestically produced/assembled cars (2020-2023, with consideration for 2024).
• Other incentives on corporate income tax and land use for the automobile industry.

These government policies aim to promote the growth and competitiveness of domestic automobile manufacturing and supporting industries. 

Hồng also highlighted the crucial role of customs in facilitating import and export activities, particularly in the automotive industry. By modernising administrative procedures and offering tax incentives, customs aim to create a conducive environment for businesses involved in importing components, raw materials and supplies for automotive production.

She underscored the collaborative efforts between customs and businesses to foster a favorable environment for automotive production and trade, ultimately contributing to the growth and development of the industry.

According to participants, the development of the automobile industry is indeed multifaceted and requires a comprehensive approach beyond just tax incentives. Experts point out various aspects that need attention, such as credit availability, technology levels, technical content, technology transfer, intellectual property costs quality standards, and environmental sustainability.

Việt Nam’s automobile industry faces stiff competition from regional counterparts like Thailand, Indonesia and China, which have enjoyed a head start in technology and labour development, leading to lower production costs. This competition is further intensified by the implementation of Free Trade Agreements (FTAs), which can potentially put pressure on a local automotive industry if it fails to develop sustainably and implement appropriate strategies.

To address these challenges, Việt Nam has devised a long-term strategic framework for the automobile industry, as outlined in policies such as the ‘Strategy for developing domestic automobile industry to 2025, vision to 2045’ and subsequent decisions and decrees. 

The implementation of tariff reductions under FTAs like the EVFTA and CPTPP will significantly impact the Vietnamese automobile industry.

The effectiveness of government policies and support measures, including those from relevant ministries and branches, in creating favourable and timely conditions for the industry is crucial. Moreover, domestic automobile manufacturers and assemblers need to make concerted efforts to enhance their competitiveness and resilience in the face of global market dynamics and trade agreements.

In discussions among experts, managers and industry stakeholders, key topics should include assessing the current status of Việt Nam’s automobile industry development strategy, identifying strengths and weaknesses, pinpointing bottlenecks and formulating solutions to propel industry growth within the framework of free trade agreements. – VNS