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For example, some 70 percent of demand for trucks of up to seven tonnes is being met with an average localization rate of 55 percent. For passenger cars of 10 seats or more, domestic manufacturers meet about 90 percent of demand, with localization rates of 20 to 50 percent.
By the end of 2022, over 400 part suppliers met Vietnam’s level 1 supplier standards for major auto manufacturers, an increase of over 200 percent compared to 2016, with production increased from 120,000 to 500,000 vehicles.
Toyota currently has 58 local suppliers, including 12 all-Vietnamese ones. The localization rate of Thaco Truong Hai is even higher, with some models reaching 70 percent. For electric cars, VinFast is currently the pioneer with a localization rate of 60 percent.
Pham Van Tai, General Director of the Truong Hai Auto Corporation (Thaco) said that by the end of 2021, the first batch of Thaco's semi-trailers was exported to the US, and exports of this item are expected to yield hundreds of millions of US dollars in 2023.
Toyota Vietnam has taken measures to help suppliers produce high quality products at competitive prices, with some 1,000 localized products of all kinds.
This progress proves that Vietnamese enterprises are capable of meeting the strict requirements of manufacturers, especially foreign-invested enterprises, as well as exporters. However, the bottlenecks lie in market capacity and the weak materials industry, which have slowed the development of mechanical engineering and of the processing and manufacturing industries.
Truong Thanh Hoai, Director of the Vietnam Industry Agency under the MoIT said materials technology is a very important industry. However, as investment costs are very high, the market capacity must be large enough for cost efficient production. Steel industry experts also affirm that, technically, Vietnam can manufacture steel products but the market size is too small, which limits investment.
According to analysts, Thailand and Indonesia each produce millions of cars every year, a market size that makes it cost effective to produce fabricated steel, whereas Vietnam produces a few hundred thousand units, in insufficient number for enterprises to invest in manufacturing steel.
A representative of Hoa Phat Group said that in 2022, Hoa Phat Dung Quat Steel researched and produced high-carbon steel grades for bead wire manufacturing of the same quality as developed countries, but at lower prices. The demand for bead wire production is increasing, but mainly depends on imports since no domestic enterprises have yet engaged in production of this material.
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