Do Thu Hoang, Vice President of Toyota Vietnam, said at a forum Thursday that suppliers in the country are capable of making simple parts such as seats and wires, but for other parts like fuel caps, costs in Vietnam are 2-3 times higher than in Thailand and Indonesia.

The country has to import about $2 billion worth of car parts each year, mostly components like the breaking and steering system, from countries like Japan, China and South Korea, according to a report submitted at the forum by the Ministry of Industry and Trade.

Pham Tuan Anh, deputy head of the ministry’s industry department, said that the large portion of imports puts the localization rate of cars with nine seats or less at 7-10 percent, even though the country had targeted a 60 percent rate by 2010.

Anh said that the reason for the imports is the country’s small market size, making suppliers unable to produce large volumes to lower prices.

Hoang proposed that the government provides financial support for suppliers to upgrade their machinery and equipment to produce more advanced parts.

"Without the support, local car producers will continue to rely on imports, and local suppliers will struggle to grow."

Pham Van Tai, CEO of Truong Hai Auto (THACO), suggested that the country should scrap imports tax on car parts which local producers are not capable of producing.

Vietnam began developing its car industry in 1991, 30 years later than other countries in the region.

The sales of imported cars in the first 10 months surged 2.2 times to 106,100 units, while that of locally-assembled ones fell 12 percent to 153,100, according to the Vietnam Automobile Manufacturers Association (VAMA).