Why is Vietnam the natural choice for those in the automotive supply chain?
1. Reach: it has 2.5 billion potential customers within a range of just 3.000 km
o Modern seaports that are fewer than five days shipping from many major markets
o Air links within four hours of those markets.
3. Vietnam is also a fast-growing international consumer market with free trade agreements (FTA) that link it to countries with over 66% of the world’s GDP or 4.1 billion consumers.
Those FTAs include:
• The Association of Southeast Asian Nations (ASEAN) economic community and the ASEAN Trade in Goods Agreement (ATIGA, the community's primary agreement concerning regional tariff reduction with the aim of achieving a free flow of goods). The community numbers 600 million people, has a GDP of USD2.4 trillion, and its per capita income is forecast to triple by 2030.
• Europe-Vietnam FTA (EVFTA), that will eliminate nearly all tariffs (over 99%), beginning in 2018. Particularly important to the automotive industry as the car trade will be liberalised after 10 years, while cars with larger engines (>3,000cc for petrol, >2,500cc for diesel) will be liberalised a year earlier.
• Korea FTA, which took effect in 2015 and will see Korea remove 95.4% of tariffs on Vietnamese imports, while Vietnam eliminates 89.9% of tariffs on Korean imports within 15 years.
• In addition, Australia, Belarus, Chile, China, Israel, Japan, Kazakhstan, New Zealand, and Russia have signed trade agreements with Vietnam.
Finally, in this unique integration of the world’s economy, automotive suppliers located in Vietnam, could reach manufacturers in those FTA countries that produce 33 million vehicles annually, while benefitting from the lowest possible tariffs.
(Sources: McKinsey, EuroCham Whitebook, Duane Morris, WTO, Thanh Nien, and the Saigon Times)