The market trends in Vietnam's automotive industry is discussed in this VietWheels guest article, as well as exploring the opportunities and challenges the auto sector is going through.
With rising rates of local procurement, assembly, and domestic manufacture, Vietnam's automotive sector has seen substantial changes recently. The sector does, however, confront a number of difficulties, such as low local procurement rates, expensive taxes and fees, and intense competition from imported automobiles.
Vietnam’s Car Production and Assembly:
In 2022, the number of automobiles assembled in Vietnam reached approximately 755,000 units per year, with 35% produced by FDI firms and 65% by domestic firms. Leading companies like Truong Hai Auto (THACO), Hyundai Thanh Cong Vietnam (HTC), and GELEXIMCO have invested in modern assembly lines and partnerships with international brands to meet the growing demand for vehicles in the Vietnamese market.
Economic Challenges and Speed Bumps:
Notwithstanding the noteworthy successes of the automobile sector in 2022, Vietnam is clearly experiencing the major macroeconomic repercussions both at home and abroad. Global GDP growth is predicted to slow in 2023, while the Central Institute for Economic Management (CIEM) predicts lower GDP growth rates for Vietnam than in 2022. The difficulties facing the sector are being made worse by consumers delaying the purchase of luxury items like cars due to the high consumer price index (CPI).
Fierce Competition from Imported Vehicles:
In the next seven to ten years, countries that are members of the CPTPP and EVFTA will also pose a serious threat to Vietnam's automobile market, particularly fully manufactured vehicles from ASEAN countries like Thailand and Indonesia. Limitations in the size of the local market, difficulties in growing production operations, low rates of local procurement, and high car pricing continue to be obstacles for the domestic auto sector.
Government Support and Initiatives:
By 2025, the Vietnamese government hopes to export 90,000 cars and $1 billion worth of related parts, among other goals for the automotive sector. However, short-, medium-, and long-term promotional plans will need to be put in place in order to accomplish these aims. Supporting the expansion and competitiveness of the sector is the goal of the government's "Strategy for the Development of the Vietnamese Automobile Industry by 2025 and Vision to 2035."
Summary
The automotive sector in Vietnam is at a turning point, with both opportunities and difficulties to be faced. The industry has numerous challenges, such as economic headwinds, competition from imported automobiles, and the requirement for higher local procurement rates, even though domestic manufacturing and assembly have increased.
For the sector to overcome these obstacles and take advantage of the rising demand for automobiles in the Vietnamese market, the government's assistance in the form of focused policies and investments would be essential. Long-term success in the sector will depend on its ability to adjust to shifting consumer tastes and technology developments.
