Viet Nam's manufacturers have enhanced the localisation rate by investing more in supporting industries. The auto supporting industry is not apart from that process, as increased localisation has gradually helped reduce the importation of components.
From 2018, import tariffs on automobiles from ASEAN countries have been reduced to zero percent for Completely Built Units (CBU), posing a major challenge for domestic manufacturers, who are already facing intense competition from neighboring countries such as Thailand and Indonesia. In particular, Viet Nam signed two new generation Free Trade Agreements (FTAs), including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA). The EVFTA agreement will cut the average tariff 6-7 per cent yearly, paving the way for imported cars to enjoy zero tariffs from 2030. The zero tariff will become a great challenge for Viet Nam's automobile industry and its supporting industries as well.
As a leading automobile manufacturer in Viet Nam, with strong potential and large-scale production, Toyota Motor Vietnam (TMV) has constantly made efforts to increase the localisation rate in Viet Nam. The company has actively developed new strategies by working towards sustainable development.
Apart from manufacturing and assembly, TMV has also focused on promoting the use of domestic components. By doing so, TMV has increased its localisation rate of some models to over 40 per cent. In particular, the Toyota Veloz Cross and Avanza Premio have been locally assembled in Viet Nam since December 2022 after a year of being sold as imported CBUs. About 300 components on the Veloz Cross and Avanza Premio models are localised, contributing to the localisation of Viet Nam’s automobile industry.
Director General of Toyota Vietnam Hiroyuki Ueda described the move as an important milestone of the carmaker in the country and also the affirmation of its commitment to promoting local automobile manufacturing.
According to TMV, the company has always made efforts to actively seek and support domestic suppliers, helping them improve their management capacity to meet Toyota's quality requirements.
Since 2018, TMV has established a specialised unit to support suppliers, giving priority to Vietnamese suppliers. The unit aims to help local suppliers to improve working efficiency and product quality, while lowering production cost.
According to a Toyota representative, Vietnamese enterprises often have limited experience and do not meet the quality requirements to become a global supplier of automobile spare parts and components. Therefore, Toyota has enhanced the capacity of local suppliers in the 5S system, which includes productivity, safety, cost control, service delivery and quality management.
In June 2022, TMV and the Industry Agency under the Ministry of Industry and Trade signed a Memorandum of Understanding for a project to enhance the domestic supporting industry.
The project aims to strengthen the capability and cooperation between domestic enterprises and automakers from 2022 to 2023.
It is the third year Toyota Vietnam and the agency have worked on the project, demonstrating the firm's efforts to increase the localisation rate, support Vietnamese suppliers, and a commitment to accompany the development of the Vietnamese automobile and supporting industry. — VNS