Eighty percent of parts imported

Ministry of Industry and Trade (MoIT) data shows that Vietnam’s automakers import some 80 percent of the parts they need. Given the unprecedented sales of over 500,000 cars in 2022, the development of support industry for the automobile industry is becoming more urgent.

Vietnam only has about 300 automobile support industry enterprises, including 40 manufacturing and assembling enterprises; 45 manufacturing chassis, bodyworks and truck bodies, and 214 producing auto components and parts.

Vietnam’s expanding network of domestic auto parts suppliers

A car is made up of about 30,000 parts, but domestic enterprises can only produce 300, most of which are simple items such as seats, power cords, rims and tubeless tires. Important parts of the engine, transmission, gearbox, safety system, and vehicle electronic system, especially semiconductor chips, cannot be produced by domestic enterprises and depend heavily on foreign enterprises.

As a result, the price of locally manufactured and assembled autos is 20 percent higher than that of imported ones. Car sales in Vietnam are expected to reach one million units a year by 2025, opening up substantial opportunities to develop a supporting industry for the sector.

Expanding domestic component network

To facilitate the development of Vietnam’s support industries and enable participation of domestic small and medium-sized enterprises in the global value chain, foreign-invested enterprises need to support each other in building a production and supply network for the domestic market and for export.

Pham Tuan Anh, Deputy Director of the MoIT’s Vietnam Industry Agency (VIA), said that in recent years, the MoIT has adopted various solutions to promote trade and connections between domestic and foreign businesses. “That's why some major car manufacturers in the world have tended to shift from importing complete-built-up (CBU) to assembling cars in Vietnam,” Anh said.

The active participation of upstream enterprises like Thaco and Vinfast plays an important role in enhancing the development of the auto support industry, providing an opportunity for secondary component suppliers to exchange, research, and improve skills and product quality.

Chu Thi Nga from Giai Phong Rubber Co., Ltd. said that when the company cooperated with Toyota Vietnam to supply plastic and silicon products, it had to meet Toyota’s 5S standards. Toyota Vietnam has cooperated with the VIA on a project to develop the domestic support industry. The project aims to improve capacity of a number of domestic enterprises through connections, training and capacity building activities, and production efficiency.

In addition to the support of leading enterprises, Vietnam’s automobile industry also needs policies to solve problems such as investment efficiency and the lack of high-quality material industries to quickly narrow the cost gap, expand the network of domestic component suppliers, and promote the development of the supporting industry.