Chính sách thuế từ Evfta dành cho ô tô, linh kiện phụ tùng ô tô và một số đề xuất cho các doanh nghiệp sản xuất, kinh doanh mặt hàng này của Việt Nam
Working Paper 2022.1.1.02
- Vol 1, No 1
CHÍNH SÁCH THUẾ TỪ EVFTA DÀNH CHO Ô TÔ, LINH KIỆN PHỤ TÙNG
Ô TÔ VÀ MỘT SỐ ĐỀ XUẤT CHO CÁC DOANH NGHIỆP SẢN XUẤT,
KINH DOANH MẶT HÀNG NÀY CỦA VIỆT NAM
Nguyễn Hải Nam1, Hoàng Thanh Trúc, Lê Thùy Duyên, Nguyễn Hoàng Quân
Sinh viên K59 Logistics & Quản lý chuỗi cung ứng – Viện Kinh tế và Kinh doanh quốc tế
Trường Đại học Ngoại thương, Hà Nội, Việt Nam
Vũ Huyền Phương, Nguyễn Minh Phương
Giảng viên Viện Kinh tế và Kinh doanh quốc tế
Trường Đại học Ngoại thương, Hà Nội, Việt Nam
Tóm tắt
Thị trường phương tiện vận tải, phụ tùng nói chung và ô tô, linh kiện phụ tùng nói riêng tại Việt
Nam được đánh giá là thị trường có tiềm năng phát triển mạnh. Thị trường xe hơi tại đây tương
đối nhỏ, nhưng phát triển nhanh nhất Đông Nam Á, đặc biệt là trong những năm gần đây, và bên
cạnh đó, Việt Nam có thể đáp ứng được nguồn nhân lực dồi dào làm việc trong các nhà máy với
mức chi phí thấp. Những lí do trên giải thích cho việc ngoài các doanh nghiệp nội địa đang tích
cực phát triển thị trường này, Việt Nam cũng thu hút được các doanh nghiệp nước ngoài tham gia
đầu tư và sản xuất tại đây, bao gồm cả các doanh nghiệp đến từ Liên minh Châu Âu (EU). Kể từ
khi hiệp định EVFTA bắt đầu đàm phán kí kết và chính thức có hiệu lực từ ngày 1/8/2020, nhìn
chung việc xuất nhập khẩu các mặt hàng này giữa EU và Việt Nam còn mạnh mẽ hơn. Việc thực
hiện nghiên cứu này xuất phát từ những lí do chính. Thứ nhất, nghiên cứu những nội dung chính
về cam kết thuế xuất nhập khẩu giữa 2 bên Việt Nam và EU. Thứ hai, phân tích những tác động
bước đầu của hiệp định đối với thương mại ô tô, linh kiện phụ tùng Việt Nam-EU. Thứ ba, nêu ra
cơ hội, thách thức, nêu ý kiến đề xuất để những doanh nghiệp sản xuất ô tô, linh kiện phụ tùng ô
tô trong nước phát triển.
Từ khóa: EVFTA, ô tô và linh kiện phụ tùng, cam kết thuế xuất nhập khẩu, tác động bước đầu,
đề xuất.
EVFTA TAX POLICIES ON CARS AND COMPONENTS AS WELL AS
SOME PROPOSALS FOR VIETNAMESE AUTOMOBILE MANUFACTURING
AND TRADING ENTERPRISES
Abstract
Inherently, the vehicle and accessories market in general, the cars and components market in
particular in Vietnam are considered markets with high economic development opportunities. The
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car market is relatively small; however, it is the fastest growing in Southeast Asia, especially in
recent years, moreover, Vietnam can meet the needs for labour with an abundant amount of human
resources working in factories, not to mention, with low cost. The above-mentioned reasons
accounts for the outside domestic enterprises that is actively developing this market, and why
Vietnam also attracts foreign enterprises to invest and produce, including investors originating
from the EU. Ever since the EVFTA agreement took place and effect (August 1, 2020), the
exchange of commodities between the EU and Vietnam has become stronger than ever. As a result,
the initiation of this research stems from some motives. Firstly, to study the main contents of the
import and export tax agreements between Vietnam and the EU. Secondly, to analyze the initial
impacts of the agreement on trade in automobiles and spare parts between Vietnam and the EU.
Lastly, to create opportunities, recognize possible challenges as well as give proposals for
domestic enterprises producing automobiles, auto parts and accessories to further improve their
profits.
Keywords: EVFTA, cars and components, import and export tax agreements, initial impacts,
proposals.
1. Research overview
Although the number is scarce, there have been thorough data analysis reports on the import
and export tax of automobiles and components in general, namely "Automobile Industry Report -
VietinBank (2019)"; “Automobile industry analysis report - ASEAN securities”. These reports
have succeeded in highlighting the main data and factors that affect the market, enabling us to
understand the overall picture of import and export of automobiles and components. However, this
report failed to point out the strengths and weaknesses of the auto and components import and
export market in Vietnam as well as make recommendations for domestic auto enterprises. More
importantly, how the industry can be positively affected when the EVFTA is implemented is not
mentioned, either. Consequently, our research paper aims to provide extra data and analysis in
order to determine the right course of action to take towards the auto and components industry.
2. Theoretical basis
2.1. Theoretical basis
Over the past few years, Vietnam has been active in signing free trade agreements (FTAs)
with countries throughout the world. The idea of an FTA is to eliminate trade and tariff barriers
and to ensure free trade among treaty party members. Vietnamese enterprises have been effectively
making use of tariff preferences in FTAs. “Total export turnover taking advantage of tariff
preferences under FTAs in 2020 reached $52.76 billion, accounting for 33.1% of total export
turnover to FTA-signed markets.” (WTO Center, 2021). Notably, growth was recorded not only
from traditional markets such as China, ASEAN but also from the US, Mexico, Canada... Besides
export, import turnover from Canada, Mexico… also has many notable points such as the fact that
Vietnam has begun to import more raw materials from these markets. Consequently, we have a
concrete basis to believe that enterprises will undoubtedly make good and effective use of tax
incentives under EVFTA, especially for key commodities such as agricultural products, apparel,
and the subject of this study, cars and auto parts.
2.2. Research method
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The qualitative method was used to process information - the process of collecting primary
information from previous domestic and foreign case studies, and using the managers from those
studies, to synthesize and analyze the matter more selectively, thereby having a as comprehensive
view of the research issue as possible: “Policy tax from EVFTA for cars, auto parts and some
proposals for enterprises and trading in Vietnam”.
In the article, numerical assumptions (assumed data) from the SMART method (Table 3) are
used from an already available quantitative report of another researcher to provide a broader view
of the effects of applying EVFTA tax policy to the commodity group in the future.
3. Overview of the EVFTA
3.1. Introduction on the EVFTA
“The EU-Vietnam trade Agreement (EVFTA) is a new generation FTA (Free Trade
Agreement) between Vietnam and 27 other members (after Brexit).” (Hong, 2019) It is an effective
and efficient agreement that is sure to provide equality for both Vietnam and the EU, taking into
considerations the differences within the diverse development levels of the 2 parties.
Upon taking effect, the EVFTA was anticipated to drastically improve Vietnam's exports,
which is a contributing factor to the diversification of markets and exports, “emphasizing
particularly on agricultural and aquatic products as well as Vietnamese products competitive
advantages.” (Hong, 2019).
3.2. The EVFTA’s coverage
The EVFTA is a win-win trade deal with equal benefits for both Vietnam and the EU which
complies with the provisions of the World Trade Organization (WTO). The agreement has 17
chapters, two protocols and several attached memos, concerning:
• Trade in goods;
• Services, investment liberalization and ecommerce;
• Government procurement;
• Intellectual property rights.
“The EVFTA also covers other aspects including rules of origin, customs and trade
facilitation, sanitary and phytosanitary measures, technical barriers to trade, sustainable
development, cooperation and capacity building, and legal-institutional issues.” (Hong, 2019)
3.3. The EVFTA’s tariff reduction
It can be inferred from the EVFTA that the elimination of tariff barriers was at the highest
level, which brought about great benefits for exports of both sides. Following the initiation of the
agreement, the EU eliminated about 85.6% of import tariffs on Vietnamese commodities, which
was equivalent to 70.3% of Vietnam’s revenue from exports to the EU. Within seven years of the
deal taking effect, EU will remove 99.2% of tariffs, 99.7% of Vietnam’s revenue from exports to
the EU, effectively.
As for the remaining 0.3% of Vietnam’s export revenue, the EU pledged to provide Vietnam
with tariff-rate quota, setting the import tax rate at 0% within the quota. For EU exports, Vietnam
agreed to truncate 48.5% of tariff lines immediately after the agreement comes into force
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(accounting for 64.5% of import revenue). After seven years, 91.8% of the tariff lines, equivalent
to 97.1% of EU export revenue, will be removed by Vietnam.
After 10 years, about 98.3% of the tariff lines (accounting for 99.8% of import turnover) will
have been cut. For the remaining 1.7% of the tariff lines, Vietnam will apply tariff-rate quota under
WTO commitments or a special roadmap to remove tariffs (Hong, 2019).
3.4. Regarding tax policies from the EVFTA for automobile products as well as auto parts and
components
Regarding automobiles and auto accessories, both Vietnam and the EU have agreed to bring
the import tax to 0%. All these items are classified as commodities that receive immediate import
tax abolition or import tax elimination for having a short schedule, with no items belonging to the
sensitive tariff line. Regarding export tax, both sides agreed not to impose tax on the above-
mentioned items.
3.4.1. Agreements on import tax from Vietnam
Before August 1, 2020, automobiles imported from Europe to Vietnam must be faced with a
tax rate of 70% based on the customs declared value, applying at the most favored nation (MFN)
tax rate of WTO members. According to the tax reduction roadmap of the EVFTA Agreement,
from August 1, 2020, Vietnam will cut taxes for 10 years, reducing an average of 7% each year
and after 10 years, it will eventually be reduced to 0%. Auto parts and accessories: “The maximum
commitment level in the Agreement is 45%. Vietnam will eliminate import tax after up to 7 years.”
(Nguyen, 2020).
Details of commitments on import tax are listed in the Table 1 below:
Table 1. Agreements on import tax from Vietnam’s side
Chapter Commodity
MFN tax rate in 2012 Agreed tax rate
78% - Cars that have the
capacity lower than
3.000cc
0% 10 years after the EVFTA took
effect.
74% - cars that have the
capacity higher than
3.000cc
Motor cars (8703)
0% 9 years after the EVFTA took
effect.
87
0% after 9-10 years since the
EVFTA took effect.
15% - specialized cars
5-25%
Auto parts and accessories
(8708)
0% 10 years after the EVFTA took
effect.
0% after 7-10 years since the
EVFTA took effect.
Tires (4011-13)
15-30%
40
0% after 3-10 years since the
EVFTA took effect.
Insulating rubber (4016)
3-10%
FTU Working Paper Series, Vol. 1 No. 1 (01/2022) | 25
Chapter Commodity
MFN tax rate in 2012 Agreed tax rate
0% after 7 years since EVFTA took
effect
70
73
83
Mirrors
15%
0% 10 years after the EVFTA took
effect.
Screws and springs
Car locks
10%
0% after 5 years since EVFTA took
effect
20-25%
10-50%
0% after 7 years since the EVFTA
took effect
Engine details
0% right after the EVFTA took
effect.
Fuel pumping equipment 3%
84
PTLK
(8483)
Transmissions
0% after 5-7 years since the
EVFTA took effect.
5-20%
0% right after the EVFTA took
effect.
Gaskets, cushions (8484) 3%
Battery (8507)
2.5%
0% after 5 years since the EVFTA
took effect.
Ignition device (8511)
10-20%
15-25%
85
Lights,
(8512)
horns,
wipers
0% after 5-7 years since the
EVFTA took effect.
90
94
Speedometers (902920)
Car seats (940120)
20%
25%
0% after 3 years since the EVFTA
took effect.
Source: WTO Center (2017)
3.4.2. Agreements on import tax from the EU’s side
It can be seen that most of the EU tax reduction roadmap for the above items are shorter than
the Vietnamese’s. For cars, all items have a reduction schedule of 7 years. Especially for auto parts
and components within HS87 and outside this group, the import tax rate of 0% will be applied
immediately after the EVFTA takes effect.
Details of commitments on import tax are listed in the Table 2 below:
Table 2. Agreements on import tax from the EU’s side
Chapter Commodity
87 Motor cars (8703)
MFN tax rate in 2012 Agreed tax rate
0% after 7 years since the EVFTA
took effect.
10%
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Chapter Commodity
Auto parts and accessories
MFN tax rate in 2012 Agreed tax rate
0% right after the EVFTA took
3-4%
(8708)
effect.
Tires (401113)
2,5-4%
40
Insulating rubber (4016) 2,50%
70
73
83
Mirrors
3-4%
Screws and springs
Car locks
3,70%
2,70%
2,7-4,7%
Engine details
Fuel pumping equipment 1,70%
Transmissions (8483) 2,7-6%
Gaskets, cushions (8484) 1,70%
84
85
0% right after the EVFTA took
effect.
Battery (8507)
3,70%
3,20%
Ignition device (8511)
Lights, horns, wipers
(8512)
2,70%
90
94
Speedometers (902920)
Car seats (940120)
2,60%
3,70%
Source: WTO Center (2017)
3.5. Regarding import and export turnover of automobiles and auto parts and accessories
between Vietnam and the EU
Table 3. Assumptive data on import turnover from the EU to Vietnam
Imports before the
agreement
Imports after the
agreements
Nations
Growth (%)
(Thousand USD)
(Thousand USD)
Germany
Sweden
Italy
68405.94
8745.509
7613.693
105362.1
12485.16
11718.19
54.02
42.7
53.9
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Imports before the
agreement
Imports after the
agreements
Nations
Growth (%)
(Thousand USD)
(Thousand USD)
Slovakia
850.491
730.091
616.631
234.273
174.772
136.175
59.531
1248.922
2311.173
884.984
502.452
490.151
843.076
58.929
46.8
Portugal
216.5
43.5
Netherlands
Czech Republic
Belgium
114.4
180.4
519.1
-1.01
France
Switzerland
Source: Le et al. (2020)
The SMART method was used to collect the data from an already existing research paper and
it can be inferred that in the EU, there are only 10 countries with auto exports to Vietnam where
Germany has an output that is superior to the rest. Based on the hypothetical data collected from
the available researches, we can see that EU countries have the tendency to increase auto exports
to our country after taking part in the EVFTA agreement.
Moreover, the previous author mentioned that the deviating effect occurred when a large
number of vehicles with the 2 HS codes of 870323 (vehicles with a displacement of more than
1,500 cc but do not exceed 3000 cc) and 870324 (vehicles with a capacity of over 3,000 cc) are
still imported in large quantities from Germany, Sweden and Italy. (Le et al., 2020).
With a breakthrough in manufacturing technology, popular European car manufacturers are
gradually gaining the trust of international consumers in general and Vietnam in particular.
Typically, Peugeot from France is creating very modern cars, applying many technologies on its
products. Or Volvo from Sweden is gradually finding a new direction for itself when hitting the
high-end car market. In the future, it is possible that the number of cars imported from Europe
from other countries will be more.
3.5.1. EU exports to Vietnam
Table 4. Components import from EU to Vietnam.
(Unit: Thousand USD)
Year January
2020 14351
February
March
April
May
June
July
All
14731
8221
11511
8186
8563
6904
72467
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Year January
2021 10367
February
March
April
May
June
July
All
11231
14762
19070 18916 17847 14948 107141
Source: General Statistics Office (2021)
Data from Table 4 shows that the import value of components in the first 7 months of 2021
increased by 34.7 million USD, equivalent to 48% compared to that time in 2020 when the EVFTA
has not yet taken effect.
Table 5. CBU cars import from EU to Vietnam.
(Unit: Cars)
Year January
February
March
154
April
108
55
May
121
92
June
34
July
57
All
609
631
2020
2021
82
53
63
111
102
174
34
Source: General Statistics Office (2021)
Inferred from Table 5, for CBU cars, there is no noticeable change. Although the number of
cars imported to Vietnam increased very slightly, the value increased by 34% from 35.7 million
USD to 48 million USD. It can be said that the change has not been clearly seen, because this is
the group of goods that Vietnam applies tax reduction after the roadmap from 9 to 10 years.
3.5.2. Vietnam exports to EU
Table 6. Vehicles and components export from Vietnam to EU. (Unit: Thousand USD)
Year January
February
19912
March
14754
88481
April
May
June
July
All
2020
2021
21026
84020
24487 31813 31655 36062 179709
82742 71430 61570 79675 551451
83532
Source: General Statistics Office (2021)
EVFTA takes effect from August 1, 2020. The data from Table 6 shows that the export value
of Vietnam's means of transport and spare parts in the first 7 months of 2021 increased markedly
compared to the same period in 2020, when the EVFTA had not yet taken effect. With an export
value of more than USD 551 million, an increase of more than 200% over the same period in 2020,
it can be seen that the EU's commitment to cut import tax on vehicles and spare parts for Vietnam
has had positive effects to this group of goods in general and to cars and components in particular.
Exported Vietnamese auto parts and accessories also have relatively high technology such as
ignition wires, gearbox parts, safety air bags, etc. But most of these spare parts are made by foreign
enterprises direct investment in production and export, with no domestic enterprises participating.
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Currently, Vietnam has not been able to export CBU cars to this market of nearly 450 million
people (as of 2020 according to Wikipedia). However, the development over time and the
participation of many businesses, including Vingroup with the leading car brand Vinfast, can give
us hope for Vietnamese cars to be exported to Europe.
4. The effect of EVFTA on the Vietnam automobile industry
4.1. On EU automobile enterprises
Having a European-branded car is a luxury for a lot of Vietnamese civilians including the
upper-middle-class because when scaled on Vietnam's average income level, most imported
European automobiles on the market are relatively expensive. Car models imported from Europe
such as BMW, Audi, Maserati, Volkswagen… cost around 2 billion VND per unit on the
Vietnamese market. The main reason is that they must pay the highest import tax (70%). Which is
exactly why the EVFTA is expected to lower the cost of European cars, making them more
accessible to Vietnamese consumers.
According to the EVFTA's tax reduction roadmap, Vietnam would lower taxes for 10 years,
at a rate of 7% per year on average, starting on August 1st, 2020 and then reducing taxes to 0%
after 10 years. Thus, the import duty on European cars into Vietnam currently stands at 63%.
However, the EVFTA explicitly stipulates that Vietnam's tax pledge cannot be applied to
secondhand automobiles, vehicles with more than 10 seats, or cargo vehicles.
Many car dealers believe that the EVFTA's plan for car tax reductions is too protracted, which
makes it increasingly difficult to influence the market. The overall price customers have to pay for
a car includes a variety of additional fees such as special consumption tax, value added tax,
registration fees… so as to minimize the real money reduction. As a result, the 15% reduction in
import tax does not appear to influence car pricing much in the first 2 years. “The European
automobile market in Vietnam needs at least 5 more years until the import tax rate is reduced to
35% so that the effects of the EVFTA can be viscerally understood.” (Lâm, 2020)
Although the EVFTA's consequences are ambiguous, the cut in import duties has given EU
enterprises greater opportunities to export cars to Vietnam.
4.2. On local automobile manufacturing and assembling enterprises
According to the Ministry of Industry and Trade (2020), to manufacture a car in Vietnam,
80% of components must be imported, resulting in 10-20% higher local car production and
assembly costs as well as 20% more expensive automobile sale prices compared to other nations
in the region. In order to bring down the cost of domestic automobiles, it is vital to consider
reducing reliance on foreign components and accessories.
When the EVFTA takes effect, the import duty on cars, auto parts, and accessories imported
from the EU will gradually be reduced to 0%. Undoubtedly, the EVFTA assists local businesses
in importing production components, particularly high-tech equipment and machinery
tremendously, by stating far cheaper importing costs than previously. This reduction will help cut
costs, with a view to make automobiles that are built and assembled in Vietnam more competitive
on both domestic and foreign markets. Furthermore, these products will also be exempt from
paying an export tax if they meet the required localization rate.
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On the other hand, importing production components at cheaper costs may lead to more
dependence on foreign components and accessories. This may help enterprises save lots of capital
as foreign components might be cheaper than self-produced ones but also prevent them from self-
producing automobile components. Therefore, it is harder for domestic cars to increase the
localization rate.
4.3. On customers
With the reduction of the import tax on European automobiles, the value-added tax and
registration fee will also be reduced, resulting in the overall price is expected to decrease. This
means that Vietnamese customers will be able to acquire European-brand cars at a more
affordable price.
Besides, as previously stated, when domestic automobile manufacturing and assembly
businesses gain from EVFTA thanks to lowered import taxes on components, the cost of
assembled automobiles will fall, and consumers will have easier access to these vehicles.
In short, the EVFTA has given Vietnamese consumers more options when it comes to
purchasing a car, but it has also sparked competition between European-imported cars, locally
assembled cars, and cars imported from other markets such as China, Thailand, Japan… which are
relatively budget-friendly.
4.4. On government
Lowering the import tax on European cars will result in lower value-added tax and registration
fee, which can lead to a significant loss of tax revenue for the state. However, in return, once
production activities stabilize and a market exists, businesses will add corporate income tax, which
is significantly greater and longer-term, domestic fees such as insurance fee or vehicle registration
fee to aid the state with generating more income.
5. Recommendations for Vietnamese automobile manufacturing and trading enterprises
5.1. Opportunities for Vietnamese automobile manufacturing and trading enterprises
5.1.1. Competitive opportunity in the domestic market
The opportunity to import high-quality and high-tech automotive products, spare parts and
components from the EU at lower prices contributes to decreased production costs and an increase
in competitiveness of products. When the EVFTA comes into effect, import tax on auto parts will
decelerate sharply which will assist firms in lowering manufacturing costs as well as selling prices
(depending on business strategies) and more sales.
Additionally, local manufacturing and assembly businesses also have the chance to grow
while the agreement is still in effect before having to compete directly and fairly with EU rivals.
5.1.2. Opportunity to export to EU market
Export opportunities for Vietnam’s strengths: auto parts and components. “The EU is a big
market for cars, with CBU cars, Vietnam has little to no chance to penetrate, with the exception of
Vinfast automobile which has the most prospect of being exported. Moreover, it is also possible
to export components to the EU so as to enjoy the benefits of 0% tax which is huge for domestic
enterprises. With simple components, Vietnam still has an advantage over EU countries in terms
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of labor costs and production costs... “It would be a waste if this opportunity was wasted," said
marketing expert Vu Quoc Chinh. (Ho Chi Minh City University of Economics).
Lastly, Vietnam can become a joint venture investment partner, or a supplier for EU investors
who are looking for opportunities to exploit the domestic and regional markets.
5.2. Challenges for Vietnamese automobile manufacturing and trading enterprises
5.2.1. Challenges in domestic competition
The protection period of 7-10 years is relatively long, but if the auto industry and Vietnam
continue to stagnate, refuse to take the initiative to improve competitiveness, the risk of failing in
the domestic market is still very high. The supporting industry - component production - must
develop in order for the car industry to grow. However, Vietnam's supporting industry still has a
number of flaws: small size, obsolete technology, a lack of manufacturing expertise, a scarcity of
raw materials, and so on. The auto parts that can be manufactured locally are simple components
and spare parts (car bodies, exhaust pipes...) with low value and low competitiveness with other
nations. Manufacturing businesses (both manufacturing and assembling automobiles and
generating replacement parts) are finding it difficult to invest and expand mass production due to
a lack of both types and output of manufactured goods. Furthermore, supporting industry
businesses have been unable to get access to international car production chains. The fact also
demonstrates that the industry's localization rate is still low and has not achieved the set target.
The car industry admits that the only way to cut costs and improve product competitiveness is to
increase the rate of localization. Localization, on the other hand, is a tough challenge for car
companies since it requires large financial resources and large output, and the Vietnamese market
capacity is still limited.
With the fact that in these coming years, when the import tax on cars from the EU to Vietnam
is reduced to 0%, Vietnam only has a limited time to prepare and enhance the domestic auto
industry's competitiveness. "If this opportunity isn’t taken advantage of, Vietnam will be faced
with a situation much similar to the Philippines a few years prior, when the market was under
development, the policy was too abstract, causing assemblers to exit from the market before
switching to import, resulting in a drastic trade balance deficit. The auto industry and supporting
industry will not reach the set target. Social security will be affected as workers become
unemployed" (Thanh, 2016) Mr. Tran Ba Duong - Chairman of the Board of Members of Truong
Hai Automobile Company considered.
5.2.2. Challenges for exporting to EU market
The EU market is a high standard market, and the geographical distance is quite far from
Vietnam. Therefore, export opportunities will be difficult to come true if enterprises do not have
the capacity or high competitiveness to join the supply network in the automotive sector.
To be able to export goods to the European market, Vietnamese enterprises need to overcome the
mandatory requirements on technical barriers such as: labeling, environment... of the EU. These
regulations are very strict with high requirements; therefore, Vietnamese goods have to improve a
lot in terms of quality to be able to overcome these barriers.
5.3. Recommendations for Vietnamese automobile manufacturing and trading enterprises
The EVFTA is expected to bring several opportunities and benefits to the Vietnamese
economy. This is also an opportunity for Vietnamese businesses to get ahead in increasing exports
FTU Working Paper Series, Vol. 1 No. 1 (01/2022) | 32
and contributing to the country’s economic progress. To take advantage of these prospects, the
Vietnamese government has to provide more active support for companies through policy
solutions and particular actions, as well as the efforts of businesses themselves.
5.3.1. Seizing opportunities
Seizing competitive opportunity in the domestic market
The government should continue to provide up-to-date legislative and industry forecasts when
EVFTA is still in force. By doing so, the government can assist businesses in accurately assessing
information, seizing opportunities, improving production processes, and improving product
quality in order to gain access to the EU market more easily.
Seizing opportunity to export to EU market
The government must have investment policies and offer stronger incentives to attract
domestic and foreign investment in order to support industry development, to meet the EVFTA's
product origin requirements.
Through the deployment of many activities in the upstream and downstream trade, the
government needs to further facilitate and support enterprises, particularly in terms of capital, and
connect Vietnamese enterprises to participate in the production chain of multinational corporations
and global business partners. According to businesses, incentives such as preferential loans,
investment procedures, land, and especially tax policies related to the import of raw materials and
spare parts for domestic production will encourage more businesses to participate, not only
providing products for the domestic market but also exporting to other markets.
The government must provide timely information and forecasts on technology markets, export
markets, and particularly large, potential, and high demand markets for imported goods, such as
the EU. Additionally, there is a need to improve the close and effective coordination of trade
promotion activities between government management agencies and other agencies and
organizations that serve as a link between businesses and the EU market like the European
Business Association in Vietnam (EuroCham), the EU–ASEAN Business Council...
Besides numerous chances, the EVFTA also poses many difficulties and challenges that
require the Vietnamese government and enterprises to face up with and strive to turn challenges
into opportunities.
5.3.2. Tackling challenges
Tackling challenge in domestic competition
The business community also needs to change its business ways in the new context of taking
competitive pressure as a driving force for innovation and development as competition is always
two-sided. On the one hand, competition takes a toll on weak businesses, especially those that still
rely on State subsidies, and those with outdated production and business technologies. On the other
hand, competition gives the impetus for businesses to continuously innovate and create, and at the
same time creates more choices for consumers. This is the path that we must go through sooner or
later in order to make innovations to the growth model and successfully transform the economic
structure, towards improving the value, quality and efficiency of economic growth. The EVFTA
FTU Working Paper Series, Vol. 1 No. 1 (01/2022) | 33
will certainly bring opportunities for businesses to proactively respond to changes in the business
environment brought about by international economic integration.
Tackling challenge for exporting to EU market
The government must continue to improve the legal system and policy processes connected
with the full execution of international obligations in general, and commitments under EVFTA in
particular. The government should ensure consistency, transparency, equality, and increasingly
favorable conditions for Vietnamese businesses in the process of reviewing, amending, and
supplementing the system of legal documents and policies in order to improve the competitiveness
of exported goods on the EU market.
Vietnam’s enterprises must aggressively analyze the content of EVFTA, particularly the
commitments relating to tariff reduction and origin restrictions, in order to properly take advantage
of EVFTA's incentives. Complying with the Agreement's origin regulations, enterprises must
actively source raw materials and auxiliary materials (they can redirect imported raw materials and
auxiliary materials to local raw materials or auxiliary sources from Korea or EU member nations).
Vietnam’s enterprises need to engage actively in advanced technology in manufacturing and
adapt production processes and management processes to satisfy EU regulatory standards and
procedures in order for their goods to overcome technical barriers and access the EU market.
Vietnam’s enterprises need to focus on meeting safety requirements, emphasizing on social
responsibility, and providing openness of information on labor and the production environment,
as defined in the EVFTA, during the production and export process.
To conclude, it can be seen that apart from the challenges that it brings, the implementation
of the EVFTA will provide numerous possibilities for Vietnamese businesses to increase their
competitiveness in both the domestic market and the EU market in the near future. The issue is
that the government and Vietnamese businesses must recognize and identify both possibilities and
obstacles in order to execute the solutions provided above in a timely and efficient manner.
Conclusion
The market for automobiles and spare parts in Vietnam is believed to have great potential.
When the EVFTA came into effect in August 2020, the growth potential of this industry became
even more apparent. After studying and doing research about the trade policies of the EVFTA in
general and with tax commitments from both sides for this industry in particular, we have been
able to discover and highlight a number of opportunities for Vietnamese businesses such as
competitive opportunities in the domestic market or opportunities to export to the EU market.
However, although the main selling points of this sector are auto parts and accessories, we can
expect Vietnam to be able to export its first number of CBU (completely built unit) cars to the EU
market. Undoubtedly, it is possible, given the efforts that domestic enterprises are making and the
attention from foreign invested enterprises to Vietnam. Along with the prospects that the EVFTA
brings, it also raises challenges that businesses must cope with. Therefore, the research team has
also proposed some solutions for not only to satisfy domestic enterprises but also state
governments. To conclude, due to our limited span of knowledge and this research paper aiming
only to apply theoretical statements to practical solutions, mistakes are inevitable and there is
unequivocally much room for improvements, please allow for our shortcomings.
FTU Working Paper Series, Vol. 1 No. 1 (01/2022) | 34
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