Automobile prices will be less attractive in 2010

The Ministry of Finance is considering raising taxes and fees on personal vehicles, which has sparked concerns that automobiles will be less attractive to buyers in 2010.

Car prices are now considered relatively attractive thanks to a series of measures undertaken by the Government to stimulate demand in the economic downturn. The value-added tax (VAT) has been slashed by 50 percent, as has the ownership registration tax. The two tax reductions alone have helped car buyers save 40 million dong when they purchase a car priced $30-40,000.

However, the Ministry of Finance (MOF) is now consulting relevant ministries on tentative tax and fee policies to be applied for 2010, under which the 50 percent VAT tax reduction would still be valid in 2010, but the 50 percent reduction in the ownership registration tax would be removed. If so, car buyers would have to pay 20 million dong more if they purchased the above car in 2010.

MOF argues that people who have enough money to buy cars are not the ones who need help with tax and fee reductions, since a car is considered a luxury item. The ministry believes it is unreasonable to reduce the ownership registration tax for car buyers, especially as traffic jams in big cities have become worse.

Tax and fee policies have had big impacts on the market. People have been rushing to purchase cars as they understand that they can save money with the 50 percent ownership registration tax reduction (6 percent in Hanoi and 5 percent in HCM City). The number of orders with automobile manufacturers has been increasing rapidly. Many urban residents have even borrowed money from banks and financial institutions to purchase cars.

Meanwhile, car manufacturers only set moderate production plans for 2009 as they were not really optimistic about the economy’s performance. They did not anticipate that the Government’s demand stimulus package and changes in the tax and fee policies would make the market bustling.

That explains why the market is now scorching hot with well-known model cars running out.

Mercedes Vietnam hopes to see its sales increase by 20 percent this year, though a Mercedes car is worth no less than one billion dong.

If car buyers want to get a Toyota Altis in 2009, they need to pay an additional 40 million dong above the manufacturer’s suggested retail price, a sum called a fee for ‘installing additional equipment’, and if they want a Camry, they have to pay 50 million dong more.

Other models, like Lancetti or Matiz, are also selling like hot cakes, even though they are less favoured by Vietnamese customers.

A car importer has predicted that the automobile market in the last months of the year will be either scorching hot because of overly high demand or freezing cold as dealers will import too many cars to sell on the domestic market before the tax increases.

Tags: Vietnam Automobile prices, Vietnam automotive, Vietnam automotive industry