Vietnam Boasts a Rapidly Growing Auto Market with Great Sales Potential

Vietnam has a population of about 95 million and a land area of 330,000 square kilometers. Since enforcing economic reforms and market liberalization in 1986, the country has enjoyed rapid economic development, scoring an average annual GDP growth of 6.3% over the past 12 years and per capita national income of US$2,300. This makes Vietnam the sixth largest economy of the ASEAN countries, next to the Philippines and surpassing Myanmar. Fueled by the growing economic prosperity, rising national income, trade liberalization and sharp reduction in import tariffs, new car sales in Vietnam already exceeded 300,000 units in 2016, showing a robust annual growth of 50%. Vietnam is one of the auto markets with the highest sales growth in the world, thus becoming a most-sought-after market for global automakers. Vietnam claims to have 56 auto plants. But there are only a little more than 10 brands operating large-sized plants, including Thaco (Kia, Mazda OEM), Toyota, Ford, Peugeot, Mercedes-Benz, GM, Mitsubishi, Honda, Isuzu, SAMCO, Vinamotor, Mekong (Fiat, Ssangyong, PMC OEM), VEAM, Suzuki, Hino, Dothanh, and TCIEV, among others. The remaining plants are operating on a small to medium scale.

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U.S. auto parts to be key issue at bilateral FTA talks

SEOUL, Nov. 19 (Yonhap) -- U.S. auto parts are expected to be a key issue in the upcoming renegotiation for the bilateral free trade pact between Seoul and Washington, observers in South Korea said Sunday. The two sides have agreed to speed up the process to amend the free trade agreement that went into effect in 2012 after U.S. President Donald Trump earlier called for a fair deal that can correct the imbalance in the movement of goods between the two countries during the summit meeting Tuesday. Trade observers said that the percentage of U.S. auto parts used by South Korean carmakers will become an important issue. Along with cars, auto parts are very important exports for Asia's fourth-largest economy. "The U.S. side is already calling for more of its auto parts to be used by trading partners at the ongoing North American Free Trade Agreement trade renegotiations," a source said. At present, because no tariffs are levied on South Korean auto parts shipped to the U.S., local carmakers with assembly lines in the U.S. can pick whatever components to put into cars assembled in the world's No. 1 economy. The existing FTA has no specific clause on this issue. Related to the possible pressure coming from Washington, local carmakers point out that depending on model, the percentage of U.S. auto parts used already stand above 50 percent. Data provided by the National Highway Traffic Safety Administration revealed that U.S. parts make up 51 percent of Santa Fe Sport SUVs made by Hyundai Motor Co., while corresponding figures for the Optima, made by Hyundai's sister company Kia Motors Corp., can reach upwards of 83 percent. On the other hand, some models made in South Korea and shipped abroad do not use U.S. parts at all. Hyundai, Kia and other carmakers said that if changes are made to the FTA that compel carmakers to use U.S. parts to avoid paying import duties, South Korean car companies will invariably have to import and use parts that they don't really need. This they said could lead to losses and hurt local parts manufacturers. German carmakers, bowing to U.S. pressure, already announced in May that they will be using more U.S. parts in their vehicles. By yonngong@yna.co.kr

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US likely to push more local auto parts in Korean cars: experts

Ahead of future trade amendments negotiations of the five-year Korea-US Free Trade Agreement, the United States is likely to demand an increased use of American-made parts on Korean vehicles exported to the states, according to industry experts on Sunday. As the Trump Administration is already pushing for a higher percentage of American auto parts to be used by its major trading partners through its ongoing North American Free Trade Agreement trade renegotiation talks, local trade officials are predicting similar provisions will be requested during the KORUS FTA amendment process. Currently, the stipulations of KORUS does not require the use of US-made parts to export Korean automobiles to the United States tariff-free. While some South Korean car models, such as the Genesis G80 and the Ioniq, exported to the states utilizes anywhere from zero to three percent of US-made car parts, according to data by the National Highway Traffic Safety Administration, American car parts make up 51 percent of Hyundai’s Santa Fe Sport SUVs, 46 percent of its Sonatas and 36 to 31 percent of its Elantra models. Kia Optima’s use of US car parts ranges from 75 to 83 percent, while the Sorrento models consists of 45 to 52 percent of American made parts. However, should FTA negations introduce this US car part procurement clause, Hyundai and Kia Motors will be forced to increase its imports of US-made parts in order to export its vehicles to the States duty-free, which is likely to lead to major losses for local suppliers of Hyundai and Kia Motors. NAFTA provisions currently stipulate that in order to export automobiles made in Mexico or Canada to the United States tariff-free, 62.5 percent of its auto parts must be produced within the three countries. However, the US is now arguing that this proportion should be increased to 85 percent and that 50 percent of the auto parts should be procured in the US. Daimler, the parent company of Germany’s Mercedes-Benz, has already pre-emptively complied with increasing US pressure, announcing in May that it will be increasing its vehicles’ use of US car parts. By Julie Jackson (juliejackson@heraldcorp.com)

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