Ministry urges assembly of Vietnam made motorbikes by 2006 HANOI - Vietnam's motorbike assembly industry has been urged to produce totally Vietnamese made bikes within six years in order to break the stranglehold of major overseas companies on the market. The call was delivered to assemblers of incomplete-knocked-down (IKD) motorbikes by Industry Deputy Minister, Nguyen Xuan Chuan during a seminar on localisation of motorbike production. The Hanoi meeting earlier this month was held by the Ministry of Industry in collaboration with the Ministry of Science, Technology and Environment and the Vietnam Bicycle and Motorbike Producers' Association. Chuan said his ministry had a target of producing entirely Vietnamese-made motorbikes by 2006 as part of its overall growth strategy. "It is time for them (IKD motorbike makers) to look at producing completely made-in-Vietnam bikes that satisfy domestic demand in terms of quality and price," he said. But market observers are none too optimistic about the ministers ambitious plans for the industry, saying there is little hope production will be any more than assembling motorbikes from mostly foreign-made parts. They said any attempt by the industry to produce parts such as engines and electronics is utopian, explaining that the bike market has 214 different motorbike models and that any viable manufacturing plant would have to produce at least 100,000 sets of parts each year. Observers said the 2006 plan could only be achieved if wealthy foreign bike makers like Honda, Yamaha or Suzuki were willing to actively assist in the local production of engines and other sophisticated parts. "Unfortunately, they prefer to crunch the market share and Vietnamese wallets rather than help us build a strong industry here," one market analyst said. Chuan said the irrationally extortionate prices charged for motorbikes on the domestic market was the reason for promoting a local industry. At present, the price of motorbikes in Vietnam is twice that of neighbouring countries like Thailand, Malaysia, Indonesia and China. For example, a Honda Dream II retails on the Thai market for just US$1,000 compared to $1,900 in Vietnam. The country now has five foreign-invested enterprises and 48 locally owned assemblers with a combined annual production capacity of two million bikes. None of the assemblers are yet producing at full capacity, but all, especially foreign companies, still make substantial profits by charging high prices. Manufactures defend their policies arguing that the State Pricing Agency has no jurisdiction over bike prices on the domestic market. Besides, they say, the small market discourages lower prices as the cost of manufacturing accessories here is almost double that of importing them. But, the deputy director of the MoI's Planning and Investment Department, Ngo Van Tru revealed during the localisation conference that powerful foreign companies still import engines for motorbikes, equal to almost half the bike's total value, completely ignoring their promises to localise engine production when they first opened businesses here in the early 1990s. Tru said these enterprises also raised the price of imported engines in order to earn such high profits: "Of course, everyone knows this, but we do not have the administrative measures to stop such trade fraud." In light of this situation, the Industry Ministry revealed it plans to increase the legal requirement for locally-made components from the current 15 per cent to 90 per cent by 2010 and export 20-30 per cent of total output. Chuan also called on foreign IKD assemblers to boost participation in localising the industry. However he conceded that high-tech processes needed to produce motorbike parts were still non-existent in Vietnam and that the industry was dependent on large-scale investments and highly-skilled workers. "The fact is that we will have to rely on foreign technology and finance to build up our own industry," he said. In order to achieve its road-map for localisation, the MoI wants all bike IKD makers to aim towards producing over 80 per cent of engine parts by purchasing engine copyrights and producing basic parts, including raw materials using advanced imported production lines. It said that only in this way can the country increase the number of domestically-produced bikes and accessories. The MoI has also asked the Government to raise tariffs on imported engines and exempt taxes for local engine manufacturers. It said the Government will no longer grant business licenses to new motorbike investors until after 2010, because the industry already has enough production capacity to satisfy the projected ten year demand of 1.7 million bikes. Vietnam News Agency - June 16, 2000.