Indonesia concerned about Vietnam’s strict new car import regulations

Already facing sluggish demand at home, Indonesia's four-wheel car manufacturers now face a bleak export future due to a new regulation issued by Vietnam designed to protect its own developing automotive industry.

The new regulation stipulates that traders are only permitted to import automobiles if they can provide valid vehicle registration certificates issued by authorities from the countries of origin.

Original quality control certificates for each vehicle and letters of authorization regarding recalls of defective vehicles from the manufacturers are also required, along with copies of quality assurance certificates provided by the countries of origin.

The regulation also requires importers to have one car from each batch shipped to Vietnam to go through emissions and safety tests.

Under the previous regulation, only one certificate was required for each model of car, regardless of how many batches were imported.

"The new rule creates additional costs; a complete inspection may take one to two months, while other cars from the shipment will have to stay at the port and be charged daily for storage," The Straits Times quoted Indonesian Automotive Manufacturers Association (Gaikindo) secretary-general Kukuh Kumara as saying.

Indonesian President Joko Widodo also expressed concern that the new policy would impact bilateral trade between the two countries, which has increased over the past three years.

Gaikindo co-chairman Jongkie Sugiarto said Indonesian manufacturers had no problems fulfilling Vietnam's quality demands, such as the Euro IV spec engine, airbags and antilock braking systems, but the sampling inspection would be a hassle.

"The inspection is difficult because it must be performed on each model, in every shipment. If (the test) failed, (Vietnam) would return the shipment," he said.

According to the Central Statistics Agency (BPS) data, Indonesian passenger car exports to Vietnam from January to November last year were valued at $241.2 million, up significantly from $17.78 million in 2016. Indonesia is also the third largest passenger car exporter to Vietnam, after Thailand and China, with a market share of 13.12 percent.

The Indonesian trade ministry's international trade director general, Oke Nurwan, said if manufacturers are reluctant to export their cars to Vietnam, Indonesia could lose around $85 million in the December-March period.

Japanese auto manufacturers have already decided to suspend exports to Vietnam following the regulation, which took effect on January 1 this year.

Toyota has halted all production for export to the Vietnamese market. The firm manufactures auto components in Vietnam, but imports of completely built units (CBUs) from Thailand, Indonesia and Japan account for around one-fifth of what it sells in the market.

Fellow Japanese giant Honda had previously planned to consolidate all production of its SUVs in Thailand to take advantage of a new tariff rule that also took effect this year to cut import tariffs for autos built and sold within the Association of Southeast Asian Nations (ASEAN) from 30 percent to zero.

The company has since abandoned that plan, and production of vehicles intended for the Vietnamese market has been suspended since early January.

In a similar move, Mitsubishi Motors has suspended production in Thailand of its Pajero Sports SUV designed for the Vietnamese market.

But the Vietnamese Ministry of Industry and Trade claims the regulation will protect consumers and create fair competition between local auto assemblers and CBU importers.

Vietnam imported only 17 cars with less than nine seats in January this year, compared to 3,700 units in just a fortnight in January 2017. In total, the country imported 337 CBUs last month, according to the General Department of Vietnam Customs.