Vietnam’s vehicle manufacturing industry will expand significantly over the next three years with $US1.2 billion to $1.3 billion of fresh capital investment expected by 2010, industry executives said on Monday, according to Dow Jones Newswires.

Domestic sales of vehicles – which include cars, trucks and buses – will reach 80,000 units by 2005 and 156,000 units by 2010, compared with just 26,900 units last year, an executive at the Ministry of Industry’s Policy Strategy Institute, or PSI, told the news agency.

“The PSI is conducting studies to prepare a major development plan for the automobile industry in the coming years. We anticipate strong growth for the industry in the near future,” he told Dow Jones Newswires, adding: “The new investment capital will come from all car manufacturers as well as state-owned firms.”

Dow Jones said that Vietnam currently has 11 foreign-invested joint ventures and 160 domestic manufacturers with a combined assembling capacity of 50,000 vehicles a year.

“But all of the ventures and manufacturers are operating under their actual capacity, because they are only focusing on supplying luxury cars which have a limited market,” the executive reportedly said.

Big cities like Hanoi and Ho Chi Minh City have begun to limit the registration of new cars to ease traffic congestion, so vehicle makers must target users in rural areas, he added, Dow Jones said.

A second PSI executive told the news agency that the ministry may give incentives to manufacturers that focus on production of spare parts.

“To have a strong auto manufacturing industry for Vietnam’s more than 80 million people, we must build it (the industry) from the most fundamental level – making spare parts, and then low-cost cars,” he reportedly said.

Vietnam has already begun a three-year programme to build low-cost cars and trucks, and expects the first locally made cars to enter the market by 2005, he also told Dow Jones.

Until then, foreign-invested joint ventures based in Vietnam are expected to meet 100% of local demand for passenger cars and 80% of demand for buses and specialised trucks, the report said.

Citing PSI figures, Dow Jones said that, of 1,000 people in Vietnam in 2002, six owned a car each.

The PSI studies will likely conclude before the end of this year and the institute will then submit an industry development proposal to the government, the report said.

Citing Vietnam Automobile Manufacturers Association (Vama) figures, Dow Jones said 18,646 cars were sold in the country, up 35% year on year, in the first seven months of this year.

Total car sales could be between 38,000 and 40,000 units this year, a VAMA official told Dow Jones.