Automotive sector is not yet playing an important role in the industrial development of Vietnam. For what concern the automotive sector, a reduction of tariff and non tariff barriers from the Vietnam side will produce an effect on the imports of components from Europe and a limited effect on the amount of FDI. For what concern the import side, due to the cost of transport and the vicinity of competing car producers, a reduction in tariff will not induce substantial increase in imports of already assembled cars from Europe, as the benefit of a preferential tariff reduction will be offset by the cost of transport. This is not true for the imports of parts and components, which under some circumstances could be imported in great number from European manufacturers. Indeed, the price elasticity of parts and components is high and a reduction of tariff would theoretically have an impact on the exports. On the other hand, without a robust domestic industry and without European investors located in Vietnam requiring components to be assembled, even a reduction in tariff will have only a limited effect on the imports. For what concerns components the real factor influencing the little demand is the limited amount of investment in the Vietnamese automotive industry. This limits drastically the effect of a reduction in tariff. The FTA will have a little effect on FDI in the automotive industry. Indeed, European car manufacturers seem to be little attracted by Vietnam as a productive platform for the ASEAN area. By looking only at the tariff component, the high protection accorded to the Vietnamese producers, combined with the parallel reduction in custom duties by the other ASEAN members and ASEAN FTA partners, would virtually render extremely cheap to export cars from Vietnam to the Asian region. Furthermore, the cheap labour available in Vietnam would be another important factor.