Carmakers forced to halt exports to Vietnam on costly, strict tests

By On January 16, 2018

Carmakers forced to halt exports to Vietnam on costly, strict tests

BANGKOK -- Toyota Motor and Honda Motor have suspended exports to Vietnam since the beginning of the year following the implementation of a rule that requires stringent checks on imported vehicles, a move viewed as protectionism by industry officials.

The new rule came into effect just as Vietnam finally eliminated its import tariff for automobiles from within the Association of Southeast Asian Nations from 30% on Jan. 1, two years later than other developed members of the bloc.

Toyota said on Tuesday that it has halted all production for export to the Vietnamese market. The Japanese automaker manufactures locally in Vietnam, but imports from Thailand, Indonesia and Japan account for around one-fifth of what it sells in the market, or 1,000 units per month. Models imported include the Hilux pickup trucks, Yaris subcompacts, sports utility vehicle Fortuner and the luxury car Le xus.

"The Vietnamese market slowed down last year clearly because consumers refrained from buying as they waited for the tariff removal at the end of 2017," Toyota Motor Thailand President Michinobu Sugata told reporters in Bangkok.

Indeed, auto sales in Vietnam between January and November slumped 10% on the year to 245,000 units. "We were anticipating a big jump in 2018 but due to the non-tariff barriers set by the Vietnamese government we cannot export to the market at all," he said.

The so-called Decree 116, announced in October, requires emission and safety tests to be conducted on every batch of automobile to be imported. In the past, only the first shipment of each model would be tested.

The Japanese Chamber of Commerce and Industry in Vietnam said one emission test could take two months and cost up to $10,000. "It will cause [a] huge waste of time and money," it said in a statement addressing Prime Minister Nguyen Xuan Ph uc in December.

The decree also requires all models to obtain a Vehicle Type Approval certification issued by authorities of the exporting country. VTA certifications are to show that the vehicle meets standards of the country it will be sold in and is normally issued by domestic entities of the importing country.

Since the decree was announced in October, the governments of major exporters such as Japan, Thailand and the U.S. have expressed concerns to Vietnam that it would become impossible for them to sell into the country. They have also suggested that the decree could violate World Trade Organization rules.

Big blow

Other automakers have also been taken by surprise by this move. Honda switched production of the CR-V, its mainstay SUV model, for the Vietnamese market to Thailand in January. Previously, parts shipped from Thailand were assembled and finished in Vietnam. Honda thought it would take advantage of the zero tariffs to consolidate all production of the SUV in Thailand to save costs.

Now, it has been dealt this blow. Production of the vehicles that it was supposed to release into the market from early January has been suspended.

Honda was expecting to import 10,000 CR-Vs in 2018, a 70% increase from what it had produced in Vietnam last year, especially as a new model had just been launched. "The latest CR-V model is very popular and we have already received around 200 orders," a dealership owner in Hanoi said. "But the cars won't be coming in until April at the earliest," he said.

He started displaying the latest CR-V model at his dealership on Tuesday but this was among the initial pilot batch that was imported from Thailand in December, before the decree came into effect. Honda paid the 30% tariff.

Mitsubishi Motor has also suspended production of its Pajero Sports SUV for the Vietnamese market in Thailand. Ford Thailand, which also ships cars to Vietnam, said in a statemen t: "We continue to raise our concerns with the Vietnam government in relation to the significant impact of [the decree] on the business operations."

Vietnam, together with Cambodia, Laos and Myanmar, was given a two-year grace period to remove all tariffs for regional trade on items agreed between ASEAN members when the 11-member bloc kicked off the ASEAN Economic Community at the end of 2015. On Jan. 1, tariffs for exporting whisky and instant noodles to Cambodia, wine to Myanmar and beer to Laos from the region were removed, from 5% previously.

AEC was created to integrate the regional economy, which has a combined gross domestic product of $2.5 trillion and a population of 640 million, by facilitating the free flow of goods, services and people. Companies, especially manufacturers, have taken advantage of this framework and accelerated cross-border investment and established regional supply chains. Vietnam's Decree 116 could throw cold water on such dev elopment.

"Vietnam had two years to develop its automotive industry but it failed to do so and is now running to protectionism," an industry official said.

Nikkei staff writers Atsushi Tomiyama in Hanoi and Hiroshi Kotani in Bangkok contributed to this article.

Source: Google News Vietnam | Netizen 24 Vietnam

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