Foreign firms rush to Vietnam’s automobile industry

• Aug 02, 2018

The Hanoitimes – The government’s policies to promote the local automobile manufacturing and related supporting industries have attracted a huge foreign investment wave in the country in the first half of this year.

South Korea’s Pyeong Hwa Automotive Co., Ltd. (PHA) in the middle of June got license to invest in a US$16.7 million automotive parts manufacturing plant at the northern port city of Hai Phong’s Dinh Vu-Cat Hai Economic Zone. Upon its launch in September 2019, the plant will supply 7.5 million products to the market per year, generating nearly 300 jobs for local laborers.
Coming to Vietnam, PHA, which has 18 plants and five laboratories around the world and is a trusted supplier to top-tier car manufacturers such as BMW, Audi, Ford, General Motors, Hyundai and Kia, also brings along several companies in its supply chain to launch their businesses in the country.
According to Lee Jae-Seung, PHA’s president, the company intended to develop Vietnam’s plant as its largest production base worldwide. PHA has already started planning a second project and has invited other investors in its supply chain to join and invest in Vietnam. Regarding product sales, PHA will begin by focusing on exporting products to overseas markets.
Earlier, Thai auto parts manufacturer AAPICO Hitech also formed a joint venture with Vinfast Trading and Production Llc, a member of Vingroup (Vietnam), to manufacture Body in White (BIW) in Vietnam. BIW refers to the stage in automotive design or automobile manufacturing when the sheet metal components of a car body are welded together.
AAPICO said it had signed a memorandum of understanding (MoU) with Vinfast to set up a press shop and assembly operations in Vinfast’s Supplier Park in Hai Phong City.
The purpose of the joint venture is to supply BIW parts for the first two models of Vinfast vehicles – a Sedan and an SUV – to be manufactured by the third quarter of 2019.
Automakers in Vietnam have also planned to expand their production in the country. Toyota Vietnam, for example, has recently also planned to invest an additional US$75 million in its factory in Vinh Phuc province to double its auto manufacturing capacity in Vietnam to 90,000 units per year from the current 45,000 units by 2023.
According to data from the Foreign Investment Agency under the Ministry of Planning and Investment, the manufacturing and processing industry led 17 industries and sectors in Vietnam’s FDI attraction in the first half of this year with US$7.91 billion, accounting for 38.9 percent of the total FDI capital. Notably, most of the investments were poured in the manufacturing and supporting industries to serve for the automobile industry.
Incentive policies
Analysts attributed the huge foreign investments in Vietnam’s automobile industry to
the application of some new policies, including Decree 116/2017/ND-CP and Decree No. 125/2017.
While Decree 116 makes it hard for importing automobiles due to tightened controls of origin, types, technical safety and environment protection requirements, it gives many opportunities for firms to develop the local automotive industry, raise localization rate and create jobs.
Foreign firms also intend to strengthen automobile manufacturing in Vietnam to be applied zero percent preferential tax for spare parts, as per Decree 125, which regulates that zero import tax is applied on auto parts imported from ASEAN countries, if the stipulated output is met for cars under nine seats. To be eligible for Decree 125, firms also need to meet the conditions as stipulated in Decree 116.
Commenting on the investment wave, Vu Tien Loc, chairman of the Chamber of Commerce and Industry, said that FDI enterprises that are in the supply chain can help Vietnamese enterprises to participate in their value chain by technology transfer, technical assistance or human resource training.
This does not just help Vietnamese businesses develop, but it is also a way for multinationals and FDI to improve their competitiveness and sustainability in Vietnam as they can be active in parts supply source, Loc said.

Source: http://www.hanoitimes.vn/investment/2018/08/81E0CAB8/foreign-firms-rush-to-vietnam-s-automobile-industry/