Lower tariffs will make car imports shoot up

Analysts have foreseen that the lower tariffs would lead to sharp increases in the car imports in the time to come. Especially, domestic automobile manufacturers will stop making cars domestically and shift to import cars for domestic sale.

In 2010, with several measures aiming to restrict the import of luxury and unessential goods to curb trade deficit, the number of imported cars decreased considerably. In the first 11 months of the year, Vietnam only imported 46,940 cars, just equal to 50 percent of the imports in the whole year of 2009. However, the turnover from imports reached $856 million.

Prior to that, the 2009 witnessed a big change with automobile joint ventures in Vietnam, when the manufacturers were allowed to import cars under the form of complete built unit (CBU). Until the decision on allowing car manufacturers to import cars to sell domestically was released, the import car market had been controlled by trading companies. Therefore, analysts believe that once automobile manufacturers also act as importers and distributors, the car market will become more and more bustling.

Toyota Vietnam and Mercedes Vietnam are pioneering the importing of CBU cars for domestic sale. Especially, Toyota Vietnam has stopped assembling Toyota Land Cruiser in Vietnam to focus on selling CBU imports.

2009 witnessed a boom in the volume of imported cars. There were 80,596 cars imported, which was double the imports in 2008, worth $1.268 billion.

In fact, with the sharp increase, CBU import cars accounted for 40 percent of the total market.

It is clear that in 2010, with several measures, imports have been partially restricted. However, analysts say there is still a high possibility that the number of imported cars will increase since the car import tariffs will decrease under the commitments Vietnam has made in bilateral agreements.

The Ministry of Finance has announced that in 2011, the import tariff on some CBU cars will reduce from 77-83 percent to 72-82 percent. The import tariffs will continue decreasing unitl 2018, when the car import tariff will be lowered to zero percent.

Dau tu newspaper has quoted its source from the Vietnam Automobile Manufacturers’ Association (VAMA) as saying that Vietnam will not have much time from now to 2018, just 8 years, to upgrade its domestic production and cut the tariffs. “Many car manufacturers have revealed their plans to shift to import cars to sell domestically instead of making cars in Vietnam,” said the source.

Even Honda Vietnam, one of the car manufacturers who has the highest content ratio of locally made cars, has also announced that it will import the medium class Honda Accord to sell in Vietnam from 2011. To date, Honda Vietnam has been assembling a sedan model, Civic, and a 5-seat MPV sports car, CRV, at its factory in Vietnam.

As for Mercedes Benz Vietnam, a lot of the Mercedes Benz car models that were recently introduced at Vietnam Auto 2010 exhibition were CBU imports. In the list of the car models the manufacturer is selling on the domestic market, the models assembled in Vietnam are the minority

To date, only several big manufacturers have heavily invested in production in Vietnam (they are the manufacturers who have a localization ratio of 20 percent and higher). Excluding the two 100 percent local automobile manufacturers, Truong Hai and Xuan Kien, which mainly make trucks, Toyota Vietnam is considered the manufacturer who has the highest localization ratio. Toyota Vietnam now has 11 domestic car part suppliers, which has helped it reach the localization ratio of 19-37 percent in its products.

In 2009, Toyota Vietnam gained a high post tax profit of 1200 billion dong, or 60 million dollar with 28,000 cars sold. This shows that automobile manufacturers have been prospering in a developing market like Vietnam.

In related news, the ownership registration tax is expected to increase to 20 percent at maximum from the current level of 15 percent. – Vietnamnet

Tags: Vietnam automotive, Vietnam automotive industry, Vietnam autos market, Vietnam car imports