Beleaguered vehicle industry calls for foreign import ban
HANOI - Domestic car-makers want vehicle imports banned
despite improved sales figures in the first six months of
the year.
Manufacturers claim a number of firms risk closure and
at best will continue to make losses until at least 2005.
The call comes amid a continuing shake-out of the
industry which observers have blamed on unrealistic
expectations and poor decision-making of the early
1990s, and an ignorance of the realities of Vietnam's
economic and political environment.
Mutsuhiko Ono, general director of Toyota Vietnam,
said about 6,000 completely built units - mostly
low-kilometre second-hand vehicles from South Korea
- had been imported to the end of June, which
represented half of all vehicle sales over the period.
"Even though we account for 30 per cent of the
domestic market we are still not making [a worthwhile]
profit," Mr Ono said, adding he was confident of seeing
stability within five years but preferential treatment
would be needed in the meantime.
"Toyota and other companies have made significant
investments in Vietnam, so we believe protection from
imports is an acceptable policy," he said.
The call has reportedly been favourably received by
government officials, but Deputy Industry Minister
Nguyen Xuan Chuan said imports were on average 30
per cent cheaper than domestic vehicles and price cuts
should be examined as a means to lift sales.
However, industry sources said accumulated losses and
production constraints made exporting or cutting prices
unfeasible.
"Production capacity at our plant in Vietnam means we
do not enjoy economies of scale. Production prices per
unit are very high in regional terms," Mr Ono said.
Observers have described the enthusiasm of vehicle
manufacturers to set up plants in Vietnam as bordering
on recklessness and have accused executives of being
blinded by the hype of the early 1990s which portrayed
Vietnam as the next Asian tiger.
One said the executives were guilty of "incredible
misjudgment, over-investment and sheer folly" for failing
to recognise the market realities of a country where
annual gross domestic product per head was just
US$300 per annum - about 5 per cent of the accepted
figure for a vehicle market to take off.
Mr Ono said Toyota had sold 2,200 units to the end of
June, up more than 250 per cent year on year, while
Ford Vietnam reported sales of 500 vehicles, up 402 on
last year's figures. However, this does not compare with
national production capacity of an estimated 75,000 a
year.
However, the industry may still face considerable pain
and a prediction last year by Industry Vice-Minister
Nguyen Xuan Chuan that 10 of Vietnam's then 14
licensed vehicle manufacturers would close or fail to get
off the ground looks like becoming a reality.
DaimlerChrysler had its US$192 million joint-venture
licence revoked last month after the Ministry of Planning
and Investment conceded the corporation had ended
plans to set up a manufacturing plant near Ho Chi Minh
City with a capacity of 17,000 vehicles a year.
Although the company has reportedly not officially
asked for the project to be cancelled, DaimlerChrysler
closed its representative office in Hanoi in 1997, a move
followed by the freezing of a US$110 million investment
by Nissan of Japan in 1998.
Mr Chuan said the shake-out would probably see only
Toyota, Ford, Mitsubishi and possibly Daewoo survive,
but the financial problems of Daewoo Vietnam's Korean
parent have put its continued operation in doubt. An
agreement which was to see Daewoo become
Vietnam's first 100 per cent foreign-owned vehicle
assembler fell apart in May.
By Huw Watkin - The South China Morning Post - August 2, 2000.
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