Vietnam’s automotive supporting industry: A bright future ahead, riding the wave of growth

Vietnam is home to more than 377 automotive-related manufacturers

According to statistics from the Ministry of Industry and Trade’s Industry Agency, Vietnam is home to more than 377 automotive-related manufacturers, including 169 foreign direct investment (FDI) enterprises, accounting for 46.43% of the total. There are, in the country, more than 40 automobile assembly and manufacturing companies, 45 chassis, body and cargo box manufacturers, and 214 component and spare part producers.

These companies not only supply the domestic automobile assembly and manufacturing sector but also export products globally, generating billions of US dollars in revenue. This has painted an optimistic picture for Vietnam’s automotive supporting industry.

The General Department of Vietnam Customs reported that Vietnam exported vehicles and parts worth US$1.34 billion in October, up 22.6% from the previous month and 14% year-on-year, taking the total to US$12.5 billion in the first 10 months of the year. This made vehicles and parts rank among the country’s top export items. On average, Vietnam reached a monthly vehicle and part export value of US$1.25 billion.

While the global automotive industry is facing challenges, the rise in Vietnam’s export of automotive components and parts underscores the country’s growing position in the global automotive supply chain.

In recent years, Vietnam has exported relatively high-tech automotive components, such as ignition wire sets, gearbox parts, airbags, and electronic components in gearboxes. However, industry observers note that these achievements in production technology and export value are mainly driven by foreign-invested enterprises.

Nonetheless, experts believe 2024 provides a golden opportunity for the automotive parts and components sector, as Vietnam has benefited from favorable conditions, and the growing investment in the manufacturing and processing sector is expected to help the automotive supply chain develop.

The Ministry of Industry and Trade has outlined a strategy focusing on the production of electric vehicles, hybrid vehicles, and vehicles using renewable energy and green fuels until 2045. The goal is to achieve a vehicle and parts export value of US$14 billion and US$36 billion by 2030 and 2045, respectively. Vietnam aims to meet 80-85% of domestic automotive component demand and become a significant supplier for regional and global markets by 2045.

The Prime Minister issued Decision 589/QĐ-TTg approving the restructuring plan for the industrial sector during the 2018-2020 period with a vision to 2025. The plan encourages large enterprises, whether domestic or FDI, to invest in the automotive sector to advance Vietnam’s automotive industry.

The Government is also working to improve institutions and policies to benefit manufacturers and consumers while ensuring alignment with international practices and commitments. Domestic automotive manufacturers are encouraged to create jobs, expand their markets, focus on exports, promote innovation and cooperation in order to develop a supporting industry ecosystem and add value to products.

In recent years, the Government has introduced several specific policies to support the automotive industry, such as import tax incentives for components and parts used in domestic automobile manufacturing and assembly, as well as reductions in registration fees for domestically manufactured and assembled vehicles. These measures not only provide an opportunity for consumers to purchase cars at lower prices but also stimulate production and development within the automotive industry.

Alongside tax incentives for domestic automobile manufacturers and assemblers, the Government has also launched tax incentive programs for the automotive supporting industry. This initiative aims to enhance the self-reliance of businesses, increase localization rates, and boost the competitiveness of the sector.

Currently, the Government has tasked the Ministry of Industry and Trade with gathering public feedback on the draft Strategy for the Development of Vietnam's Automotive Industry to 2035, with a vision to 2045. The strategy will set development targets, including objectives related to products, production volume, market share of domestically produced vehicles, exports, and integration into global value chains. It also outlines directions for the development of alternative vehicles to replace those using fossil fuels, market share targets, and technological advancements. The strategy provides a comprehensive assessment of the current state of the industry and establishes goals and solutions for future development.

These policies are designed to further strengthen institutional frameworks, offering better and more advantageous support for production, businesses, and the public. Domestic automobile manufacturers are not only creating jobs but are also encouraged to expand their markets, aim for exports, innovate, collaborate, and specialize in production to develop a supporting industry ecosystem. This approach delivers higher added value for each car manufactured in Vietnam.

Moreover, with newly enacted policies and the determination of businesses to expand factories and assembly lines, Vietnam's automotive industry continues to make progress toward its objectives, focusing on increasing localization rates in domestic automobile investment and production./.