Localization is no longer a dream

The output of automobiles manufactured/assembled in Vietnam kept increasing in recent years, creating favorable conditions for domestic component and spare part suppliers to join supply chains. Localization is no longer a dream for the Vietnamese automotive industry.

The right way to go

According to the Ministry of Industry and Trade (MoIT), Vietnam began to develop its automotive industry in 1991, about three decades later than other countries in the region. In the past five years, however, the industry has grown rapidly.

Vietnam Register’s data show that the output of automobiles manufactured/assembled in Vietnam has increased remarkably, from 287,586 in 2018 to 439,600 in 2022.

Toyota’s Veloz Cross and Avanza Premio assembled and manufactured in Vietnam
Toyota’s Veloz Cross and Avanza Premio assembled and manufactured in Vietnam

The MoIT said that domestic auto manufacturing and assembly businesses have grown strongly in terms of both quantity and quality. The localization rate of some product lines is rather high thanks to the improved supply capability of domestic supporting industry companies.

One of the pioneers in the efforts to increase the localization rate of automobiles is Toyota Vietnam. In late 2022, Toyota added two types of vehicles to the list of its autos manufactured/assembled in Vietnam (before that, these types of autos were imported in their fully-assembled form). Currently, Toyota Vietnam has five types of automobiles assembled at its factory in Vinh Phuc Province, including Vios, Innova, Fortuner (diesel), Veloz Cross, and Avanza Premio.

In the opinion of experts, localization is the right way to go, allowing automobile companies to benefit from the Government’s support policies and offer consumers good prices for autos with eye-catching design and attractive equipment. Examples include Toyota’s strategic products launched in 2022 such as Veloz Cross and Avanza Premio.

Opportunities for domestic supporting industry sector

The Vietnam Association of Mechanical Industry (VAMI) said that increased investment in auto manufacture and assembly projects in Vietnam has opened bigger opportunities for domestic support industry companies to participate more deeply in supply chains.

Many automobile firms in Vietnam have responded actively to the Government’s policy to increase the localization rate. One of them is Toyota Vietnam. Over the past years, Toyota Vietnam has implemented a project to provide support for domestic supporting industry companies in the automotive sector.

The project is aimed at building the capacity for domestic support industry companies and tightening their linkages with auto manufacturers and assemblers in a bid to increase the localization rate of autos made in Vietnam.

Toyota Vietnam provides support for a supplier
Toyota Vietnam provides support for a supplier

Pham Ngoc Sang, Head of Toyota Vietnam’s Technical Procurement Department, said, “In 2022, we provided support for four companies to enhance their capacity. They are KIMSEN Industrial Corporation, 75 Rubber One Member Limited Liability Company, Nhat Minh Company Limited, and Osaka Company. These suppliers have achieved satisfactory results by reducing their factory area and stock level, saving time and increasing labor productivity. We have recruited one supplier and chosen an additional seven potential ones.”

Along with cooperating with the MoIT’s Industry Agency, Toyota has signed a memorandum of understanding with the Vietnam Association for Supporting Industries (VASI) to expand this project.

Pham Minh Thang, VASI’s Vice President and Head of its Training and Consultation Department, said that Toyota Vietnam’s support enables supporting industry companies to improve their management capabilities and optimize their operations.

Nguyen Thi Nhan, General Director of Innotek Joint Stock Company, said that before it received support from Toyota, Innotek encountered some problems including the high stock levels of materials, semi-finished and finished products resulting from redundancies in manufacturing.

Toyota Vietnam’s support has enabled Innotek to resolve its problems, especially to improve production management through the effective implementation of the 5S and kaizen movements, Nhan said.

Trang Anh

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