Vietnam’s Largest Carmaker Braces for Import Invasion

Vietnam's largest local carmaker may lose its market leadership in 2018 when the country eases import restrictions, The Nikkei reports.

The Tokyo-based newspaper notes that Truong Hai Auto, better known as Thaco, currently assembles roughly 30% of the new vehicles sold in Vietnam. The company makes its own line of commercial trucks and buses and assembles cars from kits under contract for Kia, Mazda and PSA Peugeot Citroen.

Thaco expects to achieve record sales of 34,000 units this year.

Vietnam's poorly developed automotive supply base has prompted the company to begin making seats, windows and other components for its commercial vehicles. The move has enabled Thaco to increase local content for its domestic brand to at least 40%. The company aims to achieve more than 40% average local content for all vehicles, including cars, by 2018.

That's the year Vietnam will eliminate its 50% tax on imported cars under an agreement among the 10 member countries of ASEAN. Analysts say dropping the tariff is certain to trigger a flood of low-cost imports and may prompt at least some of Thaco's current auto partners to abandon local assembly.

The Nikkei observes that Hyundai, which controls Kia, has already decided to end technical support for Thaco's engine plant. The Vietnamese company wants to launch its own car brand. But the newspaper says the lack of a stronger domestic supply base may block that goal.

In the meantime, the Vietnamese government is pondering steps to protect Thaco with tax breaks for locally produced vehicles, according to The Nikkei.