Thailand is concerned that in the near future, many car manufacturers will move their bases to Vietnam to export to the EU and enjoy tax incentives. But with CBU cars, Vietnam has almost no opportunity to export to the EU.
According to the EVFTA Free Trade Agreement, the EU is committed to opening the automobile market for Vietnam. Belonging to group 87023, cars currently enjoying the most favored nation (MFN) tax rate of 10% will gradually decrease to 0% after 7 years.
Thailand worry far away?
According to a warning from the Thai Trade Policy and Strategy Office (TPSO), the country’s exports of automobiles, computers and electronic components face many risks after the EVFTA is signed. Ms. Pimchanok Vonkorpon, General Director of TPSO, said that many car manufacturers will move their bases to Vietnam.
Opportunity for Vietnamese cars to enter the EU?
According to expert Nguyen Minh Dong, Vietnam has almost no chance to export CBU cars to the EU.
In principle, we can import auto components from the EU or buy from EU enterprises investing in other countries and buying from manufacturers in Vietnam and assemble them into vehicles. Make sure that the materials originating from Vietnam and the EU reach 55% for export and enjoy the preferential tax of 0%.
However, Vietnam only has the advantage of cheap labor, while the automotive industry in the EU is very developed, achieving a high level of automation and very high productivity. Therefore, the factor of cheap labor cannot be competitive. Moreover, importing components from the EU to assemble and then export to the EU has no advantage, because purchased components often have higher costs than those used to assemble cars right in the EU.
Not to mention, the distance to transport cars from Vietnam to the EU is far, and the goods are bulky, so the transportation costs are not low. That’s not to mention what brand Vietnamese cars are, if it’s new, it’s very difficult to succeed, even if “the door is open”.
More importantly, the EU’s automotive technical standards are very high, while those of Vietnam are low. Achieving technical standards and being accepted by EU authorities is not easy. If implemented according to EU standards from 10 years ago, maybe there is still an opportunity to export cars, Mr. Dong said.
For EU car companies investing in Vietnam, when asked if they export cars to the EU, the obvious answer is: According to the parent company’s regulations, only cars from factories located in the EU and EU are available. The US is allowed to export to the world, the factories invested in other regions are to serve the local market, there is no problem of exporting back to the EU.
With Vinfast, a Vietnamese car brand that is cooperating with leading names in the automotive field in the EU and always cherishes big plans, then: “We have a plan to export cars to Europe but to the European market. EU market or outside the EU, so far there is nothing specific.
According to experts, only when Vietnam’s auto industry develops as strongly as Thailand, with a localization rate of 60-80%, will it be discussed about CBU cars exported to the EU. So it takes a long time with breakthrough policies, if it fails, we will never have a chance.