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
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
``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
Chuan said that with 83 different models registered to be assembled
in Vietnam, domestic firms should be able to meet most demand in
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.