September 24, 2018 05:38

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The Vietnam Business Forum (VBF): Administrative procedures are making the automobile market unstable.

16:17 | 09/07/2018

VCN- At the Vietnam Business Forum (VBF) mid-term 2018, the Car and Motorbike Working Group has suggested that the automobile market is in turmoil. This uncertainty is not only for imported vehicles but also for assembled vehicles. The cause stems from some regulations on administrative procedures.

the vietnam business forum vbf administrative procedures are making the automobile market unstable
The imported cars have started to return to Vietnam, but they are not enough to meet the market demand. Photo Nguyen Ha.

In fact, the lack of supply from the beginning of 2018 to the current unstable situation is not only CBU cars but also the car production and assembly in the country (CKD), which led to the customers having to wait longer to have a car. We are concerned that the CBU and CKD business - commonly referred to as the test of industrial and commercial development in the country - is down 31% since the entry of Decree 116 came into force. (Data of Vietnam Automobile Manufacturers Association - VAMA)

(Report of the Automobile and Motorcycle Working Group.)

According to Toru Kinoshita, the head of the Automobile and Motorbike Working Group, market size and stability are keys to attracting investment, developing domestic production as well as supporting industry to orient a strong and competitive automotive industry.

However, some provisions on administrative procedures in Decree 116/2017 / ND-CP (Decree 116) and the implementation of Decree 140/2016 / ND-CP on registration fees are now impacting to make the Vietnamese automobile market unstable (such as VTA certification requirements, ECE certification for components, imported parts ...)

The head of the task force cited that Decree 116 almost stopped all imported car business (CBUs) of developed countries (eg Japan, Europe ...) in the past six months. . A series of imported cars for the first months of 2018 have been canceled. Destroying these orders threatens thousands of jobs across Vietnam, both directly and for car dealers.

As a result, the Automotive and Motorbike Working Group continues to petition issues relating to the Foreign Vehicle Type Approval Certificate (VTA) and requires testing for each lot of imported cars.

This group said that the retroactivity of Circular 03 guiding the implementation of Decree 116 has affected both foreign invested enterprises (FDI) and Vietnamese car manufacturers. They do not have enough time to prepare.

To avoid storage bottlenecks and financial difficulties of importers and agents to avoid the arising of social and financial costs, we suggest that all built vehicles landed in Vietnam’s ports from 1/1/2018 to 30/6/2018, are considered "on the way" and exempt from the provisions of Decree 116 and Circular 03. We recommend that the Government considers deleting the request demanding foreign VTA certificates for built-up vehicles.

According to the Automobile and Motorcycle Working Group, in the first three months of 2018, one shipment was imported at the port of Ho Chi Minh City and another at Hai Phong port. However, the emission and safety testing period lasted up to three weeks. In the coming time, when the number of import cars increases (from Thailand and Indonesia), this trial may be longer

With the import cars of European origin, the statistics of this group showed that no car was imported to Vietnam from January to April 2018. The European Business Council (EuroCham) is concerned that Decree 116 and Circular 03 which require testing for each vehicle lot, is in complete contradiction of the EU-Vietnam commitment in the Free Trade Agreement Vietnam - Europe (EVFTA) on accepting ECE certification for imported vehicles, spare parts and components without having to check or test again.

the vietnam business forum vbf administrative procedures are making the automobile market unstable
Vietnam automobile market in the past 6 months is in turmoil. Photo Nguyen Ha

The representative of the Group presents three key issues for the supporting industry in Vietnam as follows: Firstly, the reason why the competitiveness of the automobile and automobile parts manufacturing industries is weak is that production scale remains low.

Secondly, capacity to meet quality / cost / delivery (QCD) requirements is a big problem for Vietnamese suppliers. In fact, few Vietnamese suppliers meet QCD standards to join the global supply chain.

Thirdly, the Government has a number of policies and mechanisms to promote the development of supporting industries but it is not really reasonable and the ability of application is limited.

Therefore, for the development of the automotive industry and automotive support industry, a comprehensive solution should be implemented based on three main pillars:

First, the policy group aims to maintain and promote a stable and long-term growth of the automobile market, including limiting negative impacts on the unstable development of the market. Market policies should ensure fair, clear and reasonable time for enterprises to prepare their business plans. (The Government should also eliminate unreasonable regulations in Decree 116 / 2017 / NĐ-CP and Decree 140/2016 / NĐ-CP to prevent the automobile market becoming unstable.

Secondly, the policy group supported to reduce the cost gap between CKD and CBU vehicles basing on the principle of ensuring fair treatment, transparency and compliance with Vietnam's international commitments. Lastly, the group’s policies and mechanisms are more practical to promote the development of suppliers.

The group also urgently requested the Ministry of Transport and the Vietnam Register to supplement the regulations to only test emissions and safety for the first shipment, accepting the test report for the next shipment without re-testing as provided in last year's rule.

EuroCham recommends that registry tests should be limited to the first batch of new models and should not be repeated for batches of vehicles of the same type. The test effectiveness of CBU models should be comparable to that of CKDs (18-36 months) in order to comply with the General Agreement on Tariffs and Trade (GATTT). Rather, the certification should be valid for at least 6 months.

The batch testing requirement should only be maintained with the base models if there is serious suspicion of fraud. In addition, the Working Group also recommends that the Government and the Ministry of Industry and Trade do not to apply retrospectively. The bridge must have a minimum test track of 800m, at least 400m of straight road before April 17, 2019.

In addition, the Automotive and Motorbike Working Group also recommends support for locally assembled vehicles to reduce production costs of manufacturers and suppliers, developing supporting industries...

For example, the government should have investment incentives for manufacturers and suppliers so that they can invest in machinery, molds and fixtures, to localize parts, thereby reducing the bad impact of low output scale.

Inviting major component suppliers to participate in automotive industry dialogues and regularly hold meetings with clear discussion points, then report to the Prime Minister more frequently to improve the feasibility of the promulgated policy.

Recently, the Office of the Government has written the opinions and conclusions of Deputy Prime Minister Trinh Dinh Dung at a meeting to evaluate the implementation of Decree 116 on conditions for production, assembly, import and trading of security services and car maintenance in Vietnam. Deputy Prime Minister affirmed the view of the Government, encouraging production and assembly of cars in the country, creating quality products, reasonable price to meet consumer demand and prevent imported products with poor quality ... on the basis of ensuring the principles of commitment to integration. He asked the ministries and branches to advise on policy making to ensure this principle.

Therefore, in order to further remove difficulties for enterprises, the Government requested the Ministry of Transport to expeditiously promulgate a circular guiding Clause 1, Article 6 of Decree 116 on quality management of automobile manufactured , assembled and promulgated in October 2018 so that enterprises have enough time to make cars according to new regulations.

Together with the Ministry of Transport, Deputy Prime Minister Trinh Dinh Dung asked the Ministry of Industry and Trade to preside over and coordinate with ministries and branches to strictly control origin as well as localization rates of intra-ASEAN cars when imported to enter Vietnam to enjoy incentives under the tax commitments. Automotive Industry Group and Motorcycles.

By Nguyễn Hà/Bui Diep