Vietnam auto sector trails global peers despite trade war boost

Volumes are expected to remain small unless domestic production is incentivised.

Despite the boost from the trade war, the performance of Vietnam’s automotive sector is expected to remain weak compared to its regional peers.

Whilst its score in Fitch Solutions’ Autos Production Risk/Reward Index (RRI) has risen from 49.3 to 49.8 out of 100, it still falls below the regional average of 57.7 and just below the global average of 50.0.

Vietnam’s automotive sector slightly accelerated to 49.8 points due to the US-China trade war, but the lack of a strong industry policy is dragging the sector down, according to the firm.

According to the breakdown of the RRI, Vietnam gained a low score of 8.9 for industry policy, as automakers are forced to look elsewhere to invest. As a result, the country got a score of 39.3 on its vehicle production volume indicator.

Volumes are expected to remain small unless domestic manufacturing is incentivised.

Despite all of this, the country remains amongst the top 10 most attractive Asian markets for auto manufacturing. Vietnam scored 58.8 for industry rewards, including the high score of 78.6 on its competitive landscape indicator. Country rewards were also attractive at 60.3, with strong points for labour force (82.1) and low average wage costs (83.9).

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