Tuesday, 19 June 2018 03:01

Major foreign-invested automakers are eyeing expansions of their production sites in Vietnam, which believes the assumption that they would turn their full attention to imports after tariffs levied on vehicles made in ASEAN are abolished this year.

Mitsubishi Motors has been working on a plan to build another automobile plant in Vietnam, adding to its plant in the southern province of Binh Duong.

“Mitsubishi Motors is seeking to expand local production in Vietnam” Mitsubishi Motors Vietnam confirmed last week.

This second plant, with an estimated $250 million in total investment capital, will be designed with an annual capacity of up to 50,000 units, executive vice president of Mitsubishi Motors Corporation Kozo Shiraji told Deputy Prime Minister Vuong Dinh Hue at a meeting in January. The factory is expected to be put into operations in 2020.

VMF- mitsubishi Motors
Mitsubishi Motors Corporation

Mitsubishi Motors reportedly worked with the central province of Nghe An to find a location for the plant.

Meanwhile, as the top provider and manufacturer in terms of sales in Vietnam, Toyota Motor Vietnam Co., Ltd. (MTV) plans to pour $40 million into raising its capacity from 50000 units per year to 90,000 units, said Pham Anh Tuan, head of the TMV strategic planning division.

“The investment will be made soon and swiftly, but it depends on sales. If we see good sales, it could reach the capacity of 90,000 units prior to 2023.” He added.

In addition to the extension of welding and painting workshops, car test sites will be upgraded to meet the regulations of Decree No.116 issued by the government last October. The decree prescribes requirements for the import, trade, manufacturing and assembly of automobiles.

TMV is expected to need an additional land area of over 9 hectares and some 300 workers for the expansion. The land area will be transferred to the automaker in October at the latest.

Asked why TMV had only revealed the projected expansion now, Tuan said that TMV proposed amendments to the country’s automobile development policy to the government 10 years ago, in response to the set scenario of completely built-up (CBU) vehicles imported from ASEAN with a localization rate reaching at least 40% before becoming immune from tariffs starting in 2018.

“At the time, Vietnam had not set forth explicit policies aimed to increase domestic automobile production, so we could not persuade our parent company to go ahead with the expansion of production facilities in Vietnam,” Tuan said.

However, the government’s new firm stance on fostering domestic automobile production urged TMV to plan the expansion now, Tuan explained.

Another foreign-invested firm, Ford Vietnam, was also seen with the expansion of its production areas. Under a decision issued last November, the Hai Duong provincial People’s Committee approved a report on evaluating the environmental impacts of the project “Ford Vietnam’s automobile manufacturing and assembling plant in Tu Minh ward, a city of Hai Duong (governed under the provincial administration)”.

Ford Vietnam Limited Hai Duong Assembly Plant

The decision indicates that Ford Vietnam’s plant capacity would rise to 20800 automobile units per year, almost a 50% increase against the 14000 units approved previously.

Meanwhile, a detailed plan of the Ford Vietnam plant ratified by the provincial People’s Committee last September showed that the total land area set for the plant amounts to 300000 sq.m, more than 65400 sq.m of which will be allocated for new facilities.

The detailed plan also includes the expansion of existing welding and assembly facilities and the building of six more, along with the establishment of a new car painting workshop and a car test site. These facilities are allegedly aimed at meeting requirements stipulated in Decree No.116.

Ford Vietnam made no comments on the total investment capital needed for the expansion. The foreign-invested firm specializes in assembling small passenger models like the Eco Sport, Fiesta and Focus, as well as the commercial vehicle Transit. Earlier this year, the company launched the newly assembled crossover Eco Sport after its additional investments in assembly lines and equipment.

Economic expert Ngo Tri Long told that it is not too difficult to make sense of the foreign-invested firms’ moves as they face pressure from the enforcement of Decree No.116 and the government’s consistent stance on expanding domestic automobile production.

Vinfast Car Design

Decree No. 116 allegedly created difficulties for automobile imports with its strict testing regulations and procedures set for CBU units, thus extending the time set aside for shipment and delivery and increasing costs, Long. Who is a former head of the Price and market Research Institute under the Ministry of Finance, analyzed.

He cited the government’s advocacy of domestic production, boosted by Truong Hai Auto Corporation and Vinfast Company, as a reason for the foreign-invested manufacturers to go ahead with their plans.

Total automobile sales in the first five months of this year reached over 103,700 units, down by 6% on-year. Of note, the sales of completely-knocked-down units soared by 10%, while those of CBUs plunged by 46%, according to Vietnam Automobile Manufacturers Association.

Reference: VIP

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