What has Vietnam’s mechanical engineering and supporting industries done?
According to Mr. Nguyen Chi Sang, Vietnam’s mechanical industry is an industry that not only contributes to reducing investment costs and accelerating the progress of industrial investment projects, especially key works/projects. The price of domestically produced mechanical products has the same quality as foreign ones, but the price is always 10-30% lower, at the same time as a counterweight to foreign products, domestic projects do not are also “pressured” by foreign partners during the negotiation and bidding process.
“For example, the hydraulic equipment provided by the Mechanical Engineering Research Institute for the Son La and Lai Chau Hydropower projects is only equivalent to 90% of imported products, not only that, due to technological autonomy, the price is only equivalent to 90% of imported products. contributing to shortening commercial power generation time by nearly 2 years. With a total investment value of about 6 billion USD, completing the project early has saved approximately 900 million USD in bank loan interest. At the same time, thanks to generating electricity 2 years early, the revenue from electricity sales due to early generation is one year. also more than 1 billion USD, not to mention the increase in electricity supply has promoted production development,” Mr. Sang emphasized.
Meanwhile, in the automotive industry, based on statistics from the Industrial Support Database system and consultation with experts, Toyota’s list of suppliers has recorded the number 58, including 12 pure Vietnamese suppliers with a total number of products and components reaching a rate of 30-40% (Mainly concentrated in the group of more than 1,000 component codes, products with high technological content and economic value such as: components Exterior, interior, iron, electrical systems… according to ASEAN’s added value formula).
Assembly line with modern welding technology of VEAM Automobile Factory |
Domestically produced metal components currently meet 85-90% of demand for motorbike production; about 15-40% of the demand for components for automobile production (depending on vehicle type), about 20% for synchronous equipment production and 40-60% for the production of agricultural machines, engines and 40% % for construction machines. Supplying metal components to high-tech industries currently meets about 10% of demand.
The metal components manufacturing industry for the motorbike industry is considered to be relatively developed with high supply capacity. Due to the large market capacity, FDI assembly enterprises in Vietnam have called on many FDI suppliers to invest and built cooperative relationships with domestic suppliers. Similar to the motorbike industry, the industry of manufacturing metal components for agricultural machinery, movers and construction machinery is relatively developed in Vietnam with a fairly high localization rate.
The metal component manufacturing industry for the motorbike industry is considered to be relatively developed with high supply capacity. |
The industry of manufacturing mechanical components for the automobile industry, synchronous equipment and high-tech industries is still facing many difficulties. According to the Department of Industry, Ministry of Industry and Trade, Vietnam’s mechanical engineering currently has strengths concentrated in three main sub-sectors, including motorbikes and motorbike spare parts; household mechanics and tools; cars and auto parts. Statistics show that these three sub-sectors account for nearly 70% of the industrial production value of mechanical engineering nationwide.
What solution for the mechanical and automotive industry??
Although there have been rapid strides and certain achievements, according to experts, Vietnam’s mechanical engineering industry currently still has many limitations; The number of products bearing Vietnamese brands with clear Vietnamese imprints is still not much; The bidding mechanism for key and large projects in localities, industries, and the country does not have a priority policy for domestic mechanical products; VAT policy for agricultural mechanical products and import policy for used agricultural machinery products; … is a barrier for the domestic mechanical industry.
Many large businesses in the supply chain still consider Vietnamese mechanical engineering as only ancillary products. In the near future, the mechanical industry requires the development of raw materials, molds, and manufacturing, not just simple cutting and machining.
Looking at the mechanical industry as a whole, Mr. Nguyen Khac Hai – Vietnam Mechanical Business Association said that mechanical manufacturing is a foundation industry. Industrialization is impossible without mechanics. Developing a certain manufacturing industry depends on the market for that product. For example, when there is a motorbike market of more than 3 million motorbikes/year, a supply chain will naturally form, and component manufacturing businesses will have the conditions to invest and develop. Production scale will determine production efficiency and production investment capacity (economies of scale). In addition to the domestic market, there is also an export market.
The market will determine production scale and production investment capacity |
Thus, to promote mechanical production, the main factor is the market. If a product wants to develop, it must encourage consumption. Tax burdens such as special consumption tax, VAT and other fees, even taxes and fees stacked on top of taxes, causing high product prices, do not promote the market. For export products, free trade agreements are a condition for Vietnamese products to go to the world and compete on a larger market scale.
On another aspect, Dr. Phan Dang Phong said: “For Vietnam’s mechanical engineering industry to be autonomous, the most important thing is that businesses must have enough force to be ready to participate in receiving technology transfer. This is a key and important factor for businesses to be autonomous and self-reliant.”
Mr. Phong gave evidence that when we buy a project, we spend money to buy the basic design and detailed design, which is very easy, but how can we “digest” those designs, to predict them? The next project we don’t have to buy anymore and we have to do it ourselves is an important issue. To do so, businesses must prepare forces to do so.
Regarding the automobile industry, Mr. Ha The Dung – Former Director of Pho Yen Mechanical Joint Stock Company (FOMECO) – said that the requirements of assembly enterprises, especially export-oriented enterprises and Foreign enterprises exceed the capacity of industrial enterprises supporting the domestic automobile industry; Customer requirements are increasingly strict, not only in terms of price, technology, quality, delivery but also social responsibility requirements related to safety, environment, working conditions…
Producing car and motorbike components at DISOCO |
“Currently we are passive in terms of basic materials. Raw materials for the production of supporting industrial products of the automobile industry such as manufactured steel, plastic, rubber and plasticizers… still mainly rely on imports. This dependence has reduced proactiveness in production and reduced product competitiveness. For example, in the story of the screw, the main reason is not the production capacity of Vietnamese enterprises but the metallurgical capacity to produce standard upstream products,” said Mr. Ha The Dung.
In addition, there is a lack of pioneering enterprises leading the regional production chain in the automobile manufacturing and assembly industry, playing a leading role in development and diffusion in the supporting industries.
In addition, it is necessary to develop modern research and testing centers. This will help the auto industry improve design capacity, rapid development and product diversity. At the same time, businesses need to pay special attention to research activities, technology transfer applications, investment in design software and modern testing equipment. Accompanying that is a production management system built on a digital platform, applying smart production…
The State continues to support the automobile manufacturing industry with tax support policies for manufacturing enterprises with high technology and high localization rates. There needs to be policies to encourage the development of supporting technology so that domestic enterprises can develop the production of components and spare parts according to international standards and prioritize investment in transportation infrastructure systems to connect diverse logistics. Methods such as road, sea, port, port services; The localization rate will be proportional to support from the state, attracting foreign investors to invest; Planning and developing infrastructure systems to meet people’s demand for cars to promote the market.
On that basis, there are reasonable measures to ensure the transparent and healthy development of the domestic automobile market through technical barriers and anti-commercial fraud measures, and consider a number of solutions. others to develop the market…
However, increasingly appropriate adjustments to the policy framework to promote the development of the industry, along with programs to support technology development, especially supporting industries, will contribute to helping businesses unwind. Remove difficulties and barriers to accessing orders that require high technical and technological characteristics from large buyers, narrow the gap in endogenous technology, and bring Vietnamese businesses deeper integration. Enter this high-tech playground.
(Source: Industry and Trade Newspaper)