Falling import tariffs on cars will give local automakers a tough time in the next few years, and some may have to quit the business, said Le Duong Quang, deputy minister of trade and industry.
"The car market has and will see harsh competition," Quang said in an interview on Dau Tu newspaper on Friday. "When import tax rates are gradually lowered under international commitments, the competition between local and imported products will heat up, and some with simple assembly facilities and without long-term plans may have to stop operation or merge with other firms."
But Quang said the competition can benefit the Vietnamese automobile industry because it will speed up the restructuring and consolidation of the sector.
He said the government will continue to offer "suitable policies" to support local companies.
It's necessary to maintain the highest tariffs possible in the final years before the tax elimination deadline comes, Quang said, adding that non-tariff barriers should be introduced to curb imports.
Vietnam will have to cut auto import tariffs from other Southeast Asian countries to 0 percent in 2018.
Quang said almost all auto companies in Vietnam are aware of the challenges resulting from the elimination of duties on imported cars.
"I believe the Vietnamese auto industry still has a chance to grow because the market is large enough for producers," he said.
As the economy expands quickly, purchasing power will increase too, he said, noting that low labor costs will continue to be a competitive edge for Vietnam.