~ Le ViÍt Nam, aujourd'hui. ~
The Vietnam News

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Vietnam ban aims to help auto assemblers

HANOI - A ban on imports to Vietnam of many types of new and secondhand motor vehicles should give a fillip to struggling domestic auto assemblers, a senior government official said on Thursday.

Vice Minister of Industry Nguyen Xuan Chuan said domestic auto assemblers should now be able to move away from being constantly in the red.
``With this measure we can help to create more room in the market for domestic assemblers,'' Chuan told Reuters in an interview.
From January 1 this year Vietnam banned imports of all new and secondhand cars and vehicles of under 12 seats, Chuan said.
The import of buses with less than 50 seats and trucks under seven tonnes would only be approved on a case-by-case basis if domestic supply was unable to meet purchasers' needs, he added. Previously, domestic firms had fought a losing battle against cheap secondhand vehicles mostly imported from South Korea.
Chuan said the Vietnam market was worth 34,000 to 35,000 vehicles annually, of which 70 percent were commercial.

``Based on that assumption, if all 11 joint ventures supplied 2 to 3,000 units they could all be able to make a profit,'' he added.
Since 1991, Vietnam has licensed 14 foreign-invested joint ventures to assemble cars, trucks and buses, but only 11 have begun operations which are mostly described by executives as loss-making.

Earlier this week Daewoo Motor Co, an unlisted unit of South Korea's Daewoo Group, said that after continual losses in its joint venture with a military firm it was bidding to become the first 100 percent foreign-owned car assembler in Vietnam.
Chuan said the Vietnamese partner wanted to sell its 35 percent stake and as long as Daewoo covered all losses and repaid the capital contribution then the government would probably give the green light.

``If foreign partners take the same approach as Daewoo and take care to cover all losses then some Vietnamese partners (in auto ventures) may wish to withdraw,'' Chuan said.

But he added that this was unlikely, and also said most firms were taking a long term view and would try to weather the dual storms of the Asian financial crisis and Vietnam's under-developed auto market.
Chuan said that with 83 different models registered to be assembled in Vietnam, domestic firms should be able to meet most demand in the country.
But he added that it could take another year -- particularly in the case of trucks and buses -- for pre-import ban inventories to be cleared and for local companies to begin reaping the benefit.
There were now around 500,000 vehicles on Vietnam's roads, and under a normal replacement ratio, this should create a demand for 50,000 vehicles a year, said Chuan.

``I think that such a market size would be sufficient for (11 joint ventures),'' he added.
The country's main road network was being upgraded to make crumbling, pot-holed highways more car-friendly, while purchasing power was increasing leading to greater potential for private car ownership, Chuan said.

Reuters - March 04, 1999.