S. KOREA'S AUTO PARTS SUPPLY

[Anchor Lead]

Demand for automobiles is rising in Vietnam with its expanding middle class. South Korea has beat Japan to become the top supplier of auto parts in the Southeast Asian nation.

[Pkg]

Chu Lai port, located in central Vietnam. It is a maritime crossroad for secondary processed products made with auto parts imported from countries like Korea and Japan.

[Soundbite] (VIETNAMESE AUTO PART FIRM) : "Vessels carrying materials, machine and equipment used in car production and assembly come in once a week."

Between this January and July Vietnam has imported around 2.3 billion dollars worth of automotive components so far. Of this total, Korean parts account for 680 million dollars worth or about 29%. That's an on-year spike of more than 15 percent, making Seoul the leading auto parts supplier. Japan which has been the market leader for several years is now runner-up. Motorcycles are still very much popular in Vietnam but car sales are rising in tune with a growing middle class. Last year, over 288-thousand vehicles were sold. Korean cars garnered greater popularity thanks to their quality and price competitiveness. This pushed up demand for Korean made auto parts as well. This June, Vietnam began manufacturing completed cars. Some 300 local firms produce car parts but most of them are small scale. So automakers inevitably need to rely on imports. The Hanoi government is considering providing special consumption tax exemption for domestically sold auto parts for five to a maximum ten years. The country's growing auto market will likely help Korean exports further expand.