A Detailed Analysis of the Failure If Vietnam's Automobile Industry

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A DETAILED ANALYSIS OF THE FAILURE OF VIETNAM’S AUTOMOBILE INDUSTRY (Draft version)

Dam Quang Huynh
National Economics University
1. Introduction
The Vietnamese government considered the auto industry an important factor in economy and has announced many incentive policies in order to develop this industry such as taxation and trade policies in many years. Developing auto industry promotes the development of many other supporting industry. Indeed, manufacturing a car requires 2000 to 3000 components, and it is an opportunity for other companies produce automobile parts. Determining the automobile industry to be a important key in the country’s industrial sector, in the early 1990’s, the Vietnamese Government offered a variety of incentives to attract both domestic and foreign investor’s money in order to develop the young industry. In 2004, the Prime Minister signed Decision No. 177/2004/QD-TTG “Approving the development plan of Vietnam’s automobile industry till 2010, vision to 2020.” This was a turning-point of Vietnam auto industry after a long way of development. However, despite many expectations and privileges offered by the decree, the plan has turned out to be a bitter failure. In fact, the automobile industry in Vietnam is still stalled, it’s development hindered by major roadblocks in Vietnam’s economy and society. Thus, this research aims to analyze the causes of the failure of Vietnam auto industry. 2. Purpose of the proposal

The proposal aims to analyze causes of the failure of Vietnam auto industry by using Evaluating external environment and the five-forces model of competition analytical method. In addition, the proposal will also suggest several solutions for above problem based on the author’s knowledge and experience. 3. Method

Methods are used involving data synthesis and analysis. Data and information used in this proposal are secondary data and collected from some major source such as internet, articles and other research or proposal related to auto industry in Vietnam. By combining analytical methods and data resources, this proposal is expected to emphasize the problem as generally as possible.

4. An overview of Vietnam auto industry
Periods of development
Before 1992, most vehicles were procured by the government and imported from the former USSR and other Eastern-bloc countries. In this period, most of domestic companies are state-owned enterprises, and their main activity is fixing imported vehicles. Period 1991 – middle of 2003

In 1991 the Vietnamese automotive industry began to change dramatically with the licensing of the first two joint ventures Mekong and VMC, it has benefited from many preferential policies. In this period, there were 11 automaker invested in Vietnam, and auto domestic company began to take shape, but their main activity is importing auto components for assembling and selling in domestic market such as Truong Hai and Xuan Kien. At the end of 2003, there were about 160 enterprises specializing in assembling, fixing and manufacturing component supporting for auto industry. Although there were a number of domestic firms, a relatively large market share is dominated by FDI enterprises such as Toyota, Hinno, MeKong, Isuzu, Ford, VMC, Mercedes. (chapter 6) Period 2003 - now

2003 was a turning-point of Vietnam automobile industry when Vietnam Government approved the development plan of Vietnam’s automobile industry till 2010, vision to 2020. The government also have published a lots incentive policies in order to encourage economics sectors in investing in auto industry. In this period, auto domestic enterprises developed rapidly in capital scale and productivity such as Truong Hai and Xuan Kien.

5. Define the auto industry
5.1. Localization rate
The term localization is related to the manufacturing or assembling of automobiles. In manufacturing of automobiles, There are many components which are imported from the other countries. The main reason...
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