Local, foreign enterprises in fierce debate over Vietnam’s new car import regulations

A new decree issued by Vietnam designed to protect its own developing automotive industry does not comply with international rules, hindering the import of cars into Vietnam, said Toru Kinoshita, chairman of the Vietnam Automobile Manufacturers Association (VAMA) and CEO of Toyota Vietnam.

The decree, which took effect on January 1, 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 decree 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.

Konishita said that while VAMA supports Vietnam’s plan to develop its automobile and supporting industries, sound policies should help expand the market, improve competition and attract more investment.

CEO of Ford Vietnam Pham Van Dung said foreign authorities only provide quality assurance certificates for cars sold in their own countries, not for those that are exported. In Europe, some countries provide the certificates, but only for cars that reach the Euro 6.0 emission standard, not for those that only meet the Euro 4.0 standard used in Vietnam.

As a result, it is very costly and complicated for traders to obtain the certificates, he said.

The leader of Ford Vietnam said the regulation that requires enterprises to have one car from each batch of imports put through emissions and safety tests in Vietnam will cost importers more time and money, because traders will have to pay for storage while the cars are checked, rather than selling them straight away.

“Businesses may have to spend two months and up to $5,000-10,000 to complete the accreditation procedure.”

Concerned about the obstacles caused by the new decree, foreign enterprises have asked local authorities to delay its implementation.

The Indonesian trade ministry's international trade director general, Oke Nurwan, said if manufacturers are reluctant to export their cars to Vietnam due to difficulties caused by the new decree, Indonesia could lose around $85 million in the December-March period, The Straits Times reported last week. 

Japanese auto manufacturers have already decided to suspend exports to Vietnam following the decree.

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.

Domestic firms hit back

However, local car assemblers disagree with the arguments. Tran Ba Duong, chairman of Vietnamese manufacturer Truong Hai Auto Corp, said: “The decree does not protect local car assemblers. We have not asked for any incentives.”

Duong said that quality assurance certificates should be thought of as CVs for each car which outline their functions and technology. In the context of limited testing ability in Vietnam, lack of consumer understanding and the ever-changing automobile industry, having a CV for a car is a legitimate consumer demand, he added.

Local car firms have not had any difficulties obtaining quality assurance certificates from foreign authorities so far, he said, adding that his firm has received certificates from South Korea’s Kia and France’s Peugeot.

Duong also disagreed with foreign car makers that have complained about the new regulation on the roads used for testing cars. Under the new decree, the roads must be at least 800 meters long, instead of 500 meters as before.

Duong said the previous regulation on test roads was outdated. Given the rapid development of automobile technology, the new standards will help enterprises detect faults before launching products onto the market.

Dung from Ford Vietnam countered that there is no connection between test roads and the quality of cars, and that enterprises will have difficulties finding land to expand their existing facilities.

However, Le Ngoc Duc, CEO of local car manufacturer Thanh Cong, said the new regulation should not be hard for enterprises to follow. If enterprises want to do long-term business in Vietnam, they should not use the excuse of having limited space to build standard test roads to check imported cars, he said.

Deputy Minister of Transport Le Dinh Tho also said that expanding existing test roads by 300 meters should not pose a problem for enterprises.

Chairman of the Government Office Mai Tien Dung said that the Vietnamese government supports car imports, but still needs policies to protect local production for the benefit of the country's nearly 100 million people.

He asked enterprises to support the government’s plan for the automobile industry’s development, under which the state will use policies to accelerate the localization rate and slash unreasonable administrative procedures.

Late this week or early next week, relevant agencies will meet to discuss the new regulation in more detail, and propose amendments to the prime minister, Dung added.

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.