Auto parts manufacturers manage to reach world level

Looking to the future

To participate deeply in the global supply chain, Vietnamese enterprises have to improve their competitiveness, promote large-scale production and focus more on high tech products. In 2023, automobile sales reached 301,989 vehicles, dropping 25 percent compared to the previous year. As a result, manufacturers had to cut production and reduce imported vehicles, leaving quite big impacts on the supply chain.

The Government’s support policies are increasingly closer to automobile manufacturers

A representative from THACO Industries said that in 2023, the group’s revenue from manufacturing auto components was estimated at nearly VND8.7 trillion, down 20 percent; and export revenue at US$105 million, down 75 percent compared to 2022.

In addition, domestic supporting industry enterprises are under great pressure from emerging enterprises, which have moved from China to Vietnam to seek their fortune. They have high technology and stable financial resources for quick production on a large scale.

Meanwhile, the situation of Vietnamese enterprises is not optimistic. Currently, in Vietnam there are only about 300 auto supporting industry enterprises of all economic sectors. Of those, there are about more than 40 automobile manufacturing and assembling enterprises; 45 enterprises manufacturing chassis and bodies; and 214 enterprises manufacturing auto components and spare parts...

The competitiveness of most of the 214 supporting industry enterprises specialized in manufacturing auto parts and components in Vietnam remains quite weak. Specifically, to join the auto parts supply chain, enterprises must meet very high standards in terms of quality, safety and environmental factors. Tier 2 and tier 3 suppliers must strictly comply with production requirements such as quality, cost and delivery while tier 1 suppliers must also satisfy requirements on research and development (R&D) capacity. For example, for auto brake assembly products, domestic enterprises need a capital amount of about VND100 billion, but profits are only about 5-10 percent. Not many domestic enterprises can bear such a large capital risk to join the game.

Investment attraction

As new waves of FDI into Vietnam will continue to increase this year, the demand for components and spare parts for the automobile and motorbike industry will also increase, which means there will be more opportunities for domestic businesses.

To take advantage of the opportunity, Vietnam also needs to form capable leading enterprises in the industry, establish a number of concentrated automobile industry centers, strengthen links between automobile manufacturing and assembling enterprises, supporting industry enterprises, research and development establishments and training facilities to improve investment efficiency and specialization capacity.

According to Pham Tuan Anh, Deputy Director of the Vietnam Industry Agency under the Ministry of Industry and Trade (MoIT), recently, the MoIT has implemented solutions on the management and development of industrial clusters, putting emphasis on the role of trade promotion between domestic and international enterprises.

“The Government’s support policies are increasingly closer to enterprises. That is why some global major automobile manufacturers have shifted from importing to assembling cars in Vietnam,” Pham Tuan Anh said.

There is still much room for the automotive mechanical industry. It can be said that the mechanical industry is the backbone of the industrial sector in general and the automotive support industry in particular. One of the directions chosen by THACO Industries is to participate in the complete OEM component supply chain for FDI and export enterprises, serving the fields of automobiles, motorbikes, construction, industry, agriculture and civil engineering.

By cooperating and connecting with enterprises, VASI, VAMI, and HAMEE Associations over the past years, THACO can be considered the “locomotive” of the domestic automotive support industry and is making many great contributions to improving the capacity of small and medium-sized enterprises. Not only serving domestic demand, this group also exports OEM components such as: Seat frames, leaf springs, trunks, and car bodies to key markets such as: North America, Northern Europe, Australia, the Republic of Korea, Japan, Malaysia, etc.