Tariff reduction will make import cars cheaper

The Ministry of Finance (MOF) has sent a dispatch to the Vietnam Automobile Manufacturers’ Association (VAMA) and relevant agencies, informing the tax cut of another 13% on import cars sourced from ASEAN countries.

The Ministry of Finance (MOF) has sent a dispatch to the Vietnam Automobile Manufacturers’ Association (VAMA) and relevant agencies, informing the tax cut of another 13% on import cars sourced from ASEAN countries. The news has been applauded by customers who believe that they will have the opportunities to buy cars at lower prices.

The import tax rate on less-than-9-seat cars will reduce from 83% currently to 70%. Meanwhile, MOF also plans to reduce the tariff on more-than-10-seat cars to 70%. In general, the tentative import tariffs MOF plans to apply on cars from 2011, come in line with the commitments Vietnam has signed before with international partners.

Tax cut means more opportunities for customers

MOF believes that the tax cuts will force domestic automobile manufacturers to improve their quality and lower their sale prices to make their products competitive with imports.

As for more-than-10-seat models, MOF believes that the currently applied tariff on these vehicles remain relatively high, while the vehicles are considered as “means of production”, therefore, the tax rate should be cut to 70%.

More-than-10-seat cars now can be made by domestic manufacturers, such as Mercedes Benz Vietnam, Ford Vietnam and Toyota Vietnam. The automobile manufacturers, who have factories in Thailand, Malaysia, the Philippines and Indonesia, are also making the same models and exporting products to many countries.

Under the AFTA commitments (ASEAN Free Trade Agreement), Vietnam will have to gradually cut the tariffs on the car imports from ASEAN countries to zero% by 2018. The tax rate will be 70% in 2011 and the tariff will be cut by 10% every year to 15% by 2015. VAMA’s Chairman Akito Tachibana said that the tariff cut will be a big challenge for VAMA’s members. He said that the association’s members have been making every effort to increase their competitiveness. If the automobile industry and supporting industries can not develop by 2018, manufacturers will have to import products for domestic consumption instead of making cars in Vietnam.

Which car models to be imported?

Currently, less-than-9-seat cars are being imported mainly from the US, UAE, Japan. Meanwhile, ASEAN countries mostly provide pick-ups. In ASEAN, Thailand is considered the production base of many big automobile manufacturers in the world. Therefore, it is predictable that cars will flow to Vietnam in the time to come from the country.

Ford has invested $500 million in the factory in Rayong province in Thailand. The factory churned out Fiesta model in July 2010 which has been sold very well in many markets. Representative of Ford Vietnam has confirmed that Ford Vietnam will import the cars to sell in Vietnam in 2011. Ford Philippines has also been exporting the cars to many countries.

Meanwhile, Honda Thailand is making seven less-than-9-seat car models, including Jazz, City, Civic, Accord (sedans), CR-V (5-seat car) and Freed (7-seat car) in big quantities.

Also in Thailand, Nissan said it will sell 5-seat cars branded March at $11,500-$16,500 per car, or 20% cheaper than the prices of the same model offered by other manufacturers. Five other manufacturers have got the licenses to make cars, but have not started the production, including four Japanese Toyota, Mitsubishi, Honda, Suzuki and Indian Tata.

A car in Thailand is now selling at $15,000 on average. This means that the sale price in Vietnam would be $45,292 after taxes and fees. If the import tariff is cut to 70%, the sale price would be cheaper by $3,217 (65 million dong) each.

Toyota Vietnam, Honda Vietnam and Ford Vietnam all have got the license to import cars under the mode of complete built unit (CBU) to sell domestically. – Vietnamnet

Tags: Vietnam car imports