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

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[Year 2000]
[Year 2001]

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.