Among the incentives, the government is urged to lower the special consumption tax for locally made parts to help them reduce prices to compete with foreign manufacturers.

Vietnam's localization rate for passenger cars of under nine seats is 7 - 10%, much lower than the target of 35 - 45% set for the car industry 20 years ago.

Fitch Solutions has forecast that Vietnam's automotive market will remain robust in 2020, as an improved credit outlook and declining vehicle prices all support higher vehicle demand.

The government’s decision to slash the registration fee for domestically-produced cars by 50% is set to further boost the sale of domestic cars in the two remaining quarters of this year.

A reduction of 50% of the registration fee for domestic cars and the removal of import tariff for car parts not available domestically would help boost the domestic car market.