Developing supporting industries to increase the use of locally produced parts is an urgent requirement if Viet Nam’s automobile industry is to be developed, and this will also help grow other industries.
In the context of the country’s increasingly deeper integration and facing fierce competition from car imports from ASEAN member countries and elsewhere in the world, investment in supporting industries to increase the rate of use of locally made parts and gradually enter the global supply chain is the direction chosen by many businesses to improve their competitiveness and ensure sustainable growth.
Truong Hai Auto Corporation (THACO) is one of the pioneers and largest investors in supporting industries.
Based on the situation on the ground in the automobile industry and the company’s production and business, THACO developed a strategy for increasing the use of local parts and participation in the global value chain right at the beginning when it invested in the Chu Lai Open Economic Zone in 2003.
In addition to investing in new auto manufacturing and assembly plants and upgrades to existing plants to increase automation and digital management for mass production to meet customers’ specific requirements, THACO has built Viet Nam’s largest automobile parts manufacturing industrial park at the Chu Lai Open Economic Zone in Quang Nam Province. It is almost 100 hectares in size.
It has 12 factories producing automobile parts, a mechanical engineering complex, not only supplying THACO’s auto assembly factories and other companies but also exporting to Southeast Asian markets and elsewhere.
The products made in these factories include interior and exterior items for buses, trucks and passenger cars; composite components; leaf springs; glass; air-conditioners; bumpers; auto frames; seats and seat covers; wire harnesses; chassis; and many others.
The factories have acquired technology from Japan and South Korea and installed modern equipment and use intelligent management systems throughout the production chain from ordering, to manufacturing and distribution.
For instance, the automotive springs plant uses production technologies transferred from South Korea’ s Daewon Group with a modern machinery system such as heat treatment line, ram line, shot blasting line, zinc coating line and quality control equipment on each stage.
The plastic components plant is equipped with a 3,200-tonne-injection moulding system and the most advanced plastic coating technology in Viet Nam with paint robots and an automatic paint feeding system.
The automobile seat plant has modern, automatic machines imported from Europe and South Korea, which produce seats for many different models and brands.
To master its own technologies and designs, THACO has invested in an R&D centre.
It also promotes joint ventures and collaborates with partners to acquire new technologies to improve their products and receive technical support for manufacturing spare parts and components for trucks, buses and passenger cars from Korea and Japan.
THACO has completely mastered the technologies used in manufacturing components like glass, seats, springs, wires, mechanical engineering components (passenger cars’ moving parts, trunks, exhaust pipes, hydraulic cylinders, bus frame, and punching components), plastic components (bumpers and interior components), air conditioning, composite components and others.
Increasing local parts rate, exports
By investing in spare parts and manufacturing plants, THACO has achieved a local parts use rate for certain auto models of over 40 per cent, meeting the regional value content (RVC) criterion and enjoying the zero tax rate when exporting to ASEAN countries while also exporting components to other countries and gradually joining the global value chain.
The largest exports are of car bumpers, passenger car wiring kits, leaf springs, and seat covers for passenger cars, with Korea, Japan, Russia, the Philippines, Kazakhstan, Malaysia, Singapore, Turkey, Bangladesh, Thailand, Indonesia, Australia, and Germany being the main export markets.
THACO’s component exports were worth over US$20 million last year and are expected to rise to $25 million this year. The company plans to expand its exports to the Europe and America in the coming time.
It plans to invest further in building new supporting industries plants to enhance automation, establish joint-venture components factories for Mazda vehicles when the output reaches 50,000 vehicles a year and acquire technology from companies who supply components to Mazda.
It will also continue to enter into joint ventures and partnerships with foreign companies to build factories for manufacturing products for export in the THACO Chu Lai Industrial Park, tie up with Kia Motors’s suppliers to produce high-tech parts, and enter the Kia and Foton OEM component supply chain in Viet Nam.
THACO also plans to develop non-auto products based on its existing technology platforms with appropriate quality and competitive prices to meet customer needs.