Mechanical engineering is an industry that needs to be included in the State's supporting industry development program and enjoy certain preferential policies because developing the mechanical engineering industry is not only developing the production of some details and parts of machines and technological lines, but also developing supporting industries for other economic, industrial and service sectors.
Mechanics - machinery and equipment is a key industry, the basis, foundation, and driving force for industrial development of any market, especially for a country in the process of promoting industrialization and modernization like Vietnam.
According to the Vietnam Mechanical Engineering Association (VAMI), the country has about 3,100 mechanical engineering enterprises with 53,000 production facilities, accounting for nearly 30% of the total number of processing and manufacturing enterprises in Vietnam. Domestically produced mechanical products currently account for only about 7% of the market. The domestic mechanical engineering - machinery and equipment industry has gradually mastered and increased the localization rate, creating a driving force to promote the development of other industrial and economic sectors, thereby directly and indirectly creating jobs for millions of workers.
Currently, Vietnam's mechanical engineering industry has strengths concentrated in three main sub-sectors, including motorbikes and motorbike spare parts; household mechanical engineering and tools; and automobiles and automobile spare parts. The industry's total revenue reached over 1.7 million billion VND and created jobs for over 1.2 million workers.
Domestic mechanical engineering has now produced and assembled most types of cars, trucks, and passenger cars; motorbike production has a localization rate of 85-95%, meeting domestic and export demand. Among them, there are some typical enterprises in the automobile sector such as: Vinfast, Thanh Cong, Thaco...
Up to now, domestically produced metal components have met 85-90% of the demand for motorbike production; about 15-40% of the demand for components for automobile production; about 20% for the production of synchronous equipment; about 40-60% for the production of agricultural machinery, power machinery and 40% for construction machinery; the supply of metal components for high-tech industries currently meets about 10% of the demand.
Notably, the metal parts manufacturing industry for the motorbike industry is considered to be relatively developed with high supply capacity. Due to the large market capacity, FDI assembly enterprises in Vietnam have attracted many FDI suppliers to invest and built cooperative relationships with domestic suppliers. Similar to the motorbike industry, the metal parts manufacturing industry for agricultural machinery, power machines and construction machinery is relatively developed with a fairly high localization rate.
According to the General Statistics Office, Vietnam's machinery and equipment production index in the first 9 months of 2024 increased by 4.6% over the same period in 2023. It is estimated that in the whole year of 2024, the production index of this industry will increase by 5% compared to 2023.
Of which, the production output of other DC motors and DC generators in 2024 is estimated at 368.68 million units, up 4.16% compared to 2023, but down 20.73% compared to 2019. This product is mainly produced in Dong Nai (accounting for 96.34% of the total output of this product nationwide); Phu Tho (accounting for 3.45%); Hai Duong (accounting for 0.21%) ...
Next are: DC motors with a capacity of ≤ 37.5 W, estimated at 407.38 million units, up 0.17% compared to 2023; household sewing machines at 3.9 million units, up 30.65%; rotary converters at 121.47 thousand units, down 17.42%...
Table: Reference for some types of machinery and equipment produced in some localities in 2024
Some results achieved
Mechanical enterprises are facing great opportunities when Vietnam participates in many free trade agreements. These agreements, when effective, will help mechanical enterprises gain an advantage in exporting, expanding the market and attracting foreign investment.
According to the Vietnam Association of Supporting Industries (VASI), the mechanical engineering sector has also gained many new customers due to the shift in production. The capacity of domestic enterprises has had positive changes. Along with that, many production stages of Vietnamese enterprises are capable of competing with Chinese and Indian enterprises.
The recent period has witnessed the remarkable growth of the mechanical industry when gradually mastering and increasing the localization rate, creating a driving force to promote the development of industry and economy, thereby directly and indirectly creating jobs for millions of workers. Products that previously had to be completely imported have now been gradually replaced by products manufactured by the domestic mechanical industry. Domestic mechanical component manufacturing enterprises have clearly demonstrated good capacity in a number of fields such as molds of all kinds, mechanical components, electric cables, plastic components, technical rubber... In addition, the demand of the supporting industry market is very large, so many enterprises have invested to improve production, focusing on developing high-quality product lines, serving foreign investment enterprises (FDI), aiming at exporting mechanical products.
In Vietnam, there have also been pioneering enterprises developing supporting industries such as Truong Hai Industrial Group - Thaco Industries (a member group of Thaco) in Thaco Chu Lai Industrial Park, Quang Nam. Thaco Industries produces many mechanical products serving life such as agricultural machinery, water supply and drainage pipes, water tanks, auto components and spare parts... Those products have helped Thaco Industries achieve billions of USD in revenue each year and have grown continuously in recent years.
Big challenges in the mechanical industry
However, in addition to the positive results in recent years, the domestic mechanical industry is also facing many challenges, especially in terms of market share because the mechanism and policies are not really complete. In addition, the problem related to the quality of industrial products supporting the mechanical industry of some domestic enterprises is still low, the production cost is high, so it lacks competitiveness. The number of products with Vietnamese brands is still not much; limitations in the supply of production materials are a major barrier to the development of the mechanical industry.
One of the main difficulties is the low level of technology and labor productivity. Many domestic mechanical enterprises mainly focus on simple processing and assembly instead of developing products with high added value. This leads to a large dependence on imported technology and raw materials.
The supporting industry in the mechanical engineering sector in Vietnam has not yet developed strongly, making the domestic supply chain incomplete. The shortage of domestic raw materials and components forces businesses to import from abroad, increasing production costs and reducing the competitiveness of Vietnamese mechanical products.
Furthermore, the research and development capacity in the Vietnamese mechanical industry is still limited. Many enterprises do not have enough resources or do not pay attention to investing in research and development, which reduces the ability to innovate and develop new technologies, affecting competitiveness in the international market.
Development solutions
For sustainable development, the Vietnamese mechanical industry needs to continue implementing many synchronous solutions such as:
Investing in technology and improving product quality: Mechanical enterprises need to focus on investing in modern production technology such as automation, robots, and artificial intelligence. This not only helps increase productivity but also improves product quality, meeting international standards.
Developing supporting industries: Vietnam’s mechanical engineering industry needs to build a strong domestic supply chain to reduce its dependence on imported raw materials and components from abroad. This can be done through cooperation with international businesses or calling for investment in the supporting industry sector.
Strengthening human resource training: High-quality human resources are an important factor in improving production capacity and innovation. Therefore, investment in training qualified workers, engineers, and mechanical experts is necessary. Intensive training programs in new technology, production management, and product development should be promoted.
Strengthening research and development (R&D): Investing in R&D helps mechanical enterprises improve their innovation capacity, develop products with higher added value, and improve their competitiveness. The government also needs to have policies to support R&D in the mechanical industry, thereby encouraging enterprises to invest in this field.
International cooperation: Vietnamese mechanical enterprises need to continue to seek cooperation opportunities with international partners to learn from experience, transfer technology and expand markets. Participating in the global supply chain also helps enterprises improve production capacity and increase competitiveness.
According to VASI, to develop the supporting industry for the mechanical industry, there needs to be an output support program by connecting with potential buyers of each industry; incentives for current medium-sized supporting industry companies to invest in expanding production, training human resources, financial support... At the same time, it is necessary to help businesses have more conditions to access new technology. It is necessary to consider equal investment incentives between domestic mechanical enterprises and FDI enterprises. In addition, the state should also create more orders, including orders for supporting industrial products for Vietnamese mechanical enterprises, especially public investment projects.
The mechanical industry needs to be included in development programs with certain incentives on taxes, capital, markets, etc. because this is a fundamental manufacturing industry, supporting many industrial and service sectors.
To solve the problems of the mechanical industry, there should be a number of priorities such as: creating a source of long-term loans with stable interest rates according to the production characteristics of mechanical enterprises; issuing bidding regulations to contribute to increasing the rate of using domestically produced materials and goods; creating a market for domestic mechanical enterprises; building mechanisms and policies to support production and encourage the consumption of domestic mechanical products in accordance with international commitments.
Currently, the Ho Chi Minh City Association of Mechanical and Electrical Enterprises (HAMEE) is implementing the “Made by Vietnam” project to create an ecosystem to form a value chain supply chain for Vietnamese enterprises, helping to improve the quality and quantity of Vietnamese products. At the same time, within the framework of the project, it also promotes the promotion of Vietnamese enterprises and industrial products in the domestic market as well as connecting to foreign markets through trade promotion programs.
(Center for Industry and Trade Information)
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