Auto prices in Vietnam are much higher than those in other countries due to high taxes and fees, as well as a low volume of locally-made cars, according to the Ministry of Industry and Trade.

In particular, car prices in Vietnam double those in Thailand and Indonesia. The gap is even bigger in comparison to countries with developed auto sectors, such as the U.S. and Japan.

The admission was made as part of the Ministry of Industry and Trade’s report on obstacles in the automobile sector and challenges to increasing the sector's localization rate.

According to the ministry, the quality of locally-assembled autos has improved but is not as high as imported vehicles.

In addition, the connection between car assembling and manufacturing enterprises and auto part producers remains loose, while a system of large material and accessory suppliers has yet to be established.

Vietnam is now home to some 40 auto assemblers and manufacturers, which can meet about 70 percent of the local demand for cars with fewer than nine seats each.

The total capacity of all car assembling factories in Vietnam reached some 755,000 units last year.

The Ministry of Industry and Trade assessed that the domestic auto assembling and manufacturing sector has yet to meet the requirements.

Most local factories conduct simple assembling phases. The production line of most of local firms includes only four main phases: painting, welding, assembling, and revision.

The localization rate has reached 60 percent for buses, 35-40 percent for trucks, and 25 percent for cars.

Tires, tubes, chairs, outside mirrors, electric wires, accumulators, and plastic parts are all currently produced in Vietnam.

Meanwhile, up to 80-90 percent of materials for manufacturing auto accessories, such as alloy steel, aluminum alloy, plastic beads, technical rubber, and materials for molding, must be imported. The total value of these materials is about US$5 billion.

The weak capacity of supporting industry enterprises also raises concerns.

Most mold manufacturers are small and lack of connection, while the number of ingot manufacturers is modest. In addition, the proportion of faulty products remains high.

The Ministry of Industry and Trade attributed the automobile sector’ failure to meet the requirements to the limited domestic market size.

The market is small and occupied by many assemblers with various models, causing difficulties for enterprises to manufacture a large volume of products and for supporting industry firms to access foreign auto manufacturers.

Furthermore, Vietnam’s gross domestic product per capita is still lower than $4,000 per year, which is not enough to foster the development of the automobile sector.

Meanwhile, other regional countries, such as Thailand and Indonesia, have had policies to attract large investment projects, putting pressure on Vietnam’s auto sector.

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