More assistance for supporting industry

According to economic experts, the development of the supporting industry needs the Government’s support through a set of cohesive and stable policies that facilitate sustainable business growth.
Inadequate linkages and challenges in accessing financial resources
Vietnam’s supporting industry has been grappling with challenges. These include the adoption of new technologies and production lines that meet stringent criteria of multinational corporations and global supply chains. Simultaneously, businesses are struggling to secure financial capital and provide comprehensive training to cultivate highly skilled technical labor in the industry.
Ngoc Son, Director of Giang Son Co., Ltd., acknowledges the persistent difficulties faced by businesses in obtaining capital for their growth initiatives. Notwithstanding the Government’s efforts, challenges still exist in channeling funds from credit institutions and banks to eligible enterprises.
Due to a lack of centralized production scale, the domestic automotive industry faces challenges in localization
Echoing these sentiments, Pham Van Tai, CEO of Truong Hai Auto Joint Stock Company (Thaco), emphasizes that the key stumbling block for the supporting industry lies in the pursuit of substantial production output and enhanced capabilities to attract customers. Regrettably, the local industry falls short in terms of adequate investments and establishing robust connections, which, in turn, undermines its confidence to venture beyond domestic borders.
Furthermore, Nguyen Trung Hieu, Head of the Business Planning and External Relations Department at Toyota Motor Vietnam Company, underscores the significance of market scale as a central challenge impeding the growth of the Vietnamese automotive industry. The relatively modest size of the market and production hampers efforts to attract component suppliers. In comparison to regional counterparts such as Thailand and Indonesia, Vietnam’s production volume per vehicle significantly trails behind. This situation restrains the domestic automotive industry’s ability to achieve true localization.
For instance, Thailand currently boasts an annual production rate of approximately two million vehicles, with a balanced split of 50 percent for domestic consumption and the remaining 50 percent earmarked for export. Similarly, Indonesia’s production stands at 1.1-1.2 million vehicles annually, with 80-90 percent catering for domestic needs, leaving the remainder for international markets. By contrast, Vietnam’s production output remains limited to approximately 250-300 thousand vehicles per year. It is noteworthy that both Thailand and Indonesia export their vehicles to Vietnam and various other countries.
As a result, Vietnamese automobile manufacturers find themselves in direct competition with regional peers, as there is the absence of import duties on fully assembled vehicles. Consequently, the automotive industry of Vietnam faces fierce competition on both domestic and international fronts.
Enhancing connectivity and addressing policy challenges
For Vietnam’s supporting industry businesses to thrive and actively participate in supply chains, cost reduction measures are needed. Specifically, companies should be provided with favorable conditions to access credit, such as preferential loans and non-collateralized guarantees. Simultaneously, enhancing land and production area accessibility and streamlining construction procedures are paramount.
According to Truong Thanh Hoai, Director General of the Industry Agency under the Ministry of Industry and Trade, the ministry has taken decisive steps by establishing three regional industrial development support centers. These centers, strategically located in key economic regions of the northern, central, and southern regions, aim to empower industrial and supporting industry enterprises. Their missions include fostering innovation, facilitating technology transfer, bolstering quality and productivity, adding value, and integrating these businesses into global supply chains.
From a business standpoint, Pham Van Tai underlines the three crucial driving forces behind the supporting industry’s growth: market demand, scientific and technological advancements, and policy support. To catalyze progress, state policies must exhibit greater precision and alignment with enterprises. This entails offering targeted tax incentives, investing in specialized industrial parks, and implementing policies that incentivize and support seamless integration of businesses into the global market.
“Unity and collaboration among businesses are paramount. Large-scale enterprises should lead the way for their smaller counterparts,” highlights Pham Van Tai, expressing his vision for the industry’s future.

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