Local automobile manufacturers in Vietnam have felt the pinch following last week’s decision to approve the import duty scheme for secondhand cars, paving the way for the import of used cars into the domestic market.
Decision 98 signed by Deputy Finance Minister Truong Chi Trung said the import tariff applied to secondhand cars would be set at 150 per cent.
Meanwhile, the import tax on new cars will be decreased by 10 per cent to 90 per cent, the decision stated.
Not a few months ago, the Ministry of Finance also decided to cut special consumption taxes on imported cars to 50 per cent from the previous 80 per cent from the start of 2006.
The consecutive reductions in taxes for foreign cars will make big changes in the Vietnamese automobile industry when the decision takes effect, as in the past the import of second hand cars has been forbidden to protect local enterprises, experts said.
However, trading enterprises would only be able to import secondhand cars after the Ministry of Trade adjusts import mechanisms on a number of commodities including secondhand automobiles.
Pham Anh Tuan from the Vietnam Automobile Manufacturers Association (VAMA) said: “With the introduction of secondhand car imports in the coming time, several trading enterprises may find lots of profits from importing such automobiles.”
“It will be very difficult for the customs to identify whether price declarations of importers are honest,” he said, adding that in several countries, secondhand cars were very cheap, sometimes only US$1,000.
The government’s new move is in response to current sky-high prices of locally assembled cars, and manufactures should be pressured to reduce their price, according to experts.
Recently, VAMA, which presents the most influencing carmakers in the country, announced that locally produced car prices will not be coming down.
The association said that the recent 10 per cent special consumption tax (SCT) increase on locally assembled cars to 50 per cent was the reason for the hike in car prices.
VAMA’s Tuan said that it was expected the sales volume of cars from local assemblers would sharply reduce by around 10,000 in comparison to the 32,000 units sold in 2005.
Do Huu Hao, Deputy Minister of Industry, said: In addition to the increase of SCT, the reduction of import duty on new automobiles will cause more difficulties for automakers’ businesses.
A foreign-led carmaker said “The business strategy of several foreign-invested automobile companies may change due to the government’s decision on import duty reduction.”
He said, some foreign-invested carmakers would turn their business to importing cars to sell in the country instead of manufacturing.
Meanwhile, consumers who want to buy cars are waiting for the reduction of car prices right after the decision comes into effect.
Deputy Minister Hao said Vietnam has to cut the import tax on autos to 20 per cent by 2010 as it committed to ASEAN countries in an effort to open its automobile market.
Hao said only automobile enterprises with high local contents in their products can survive the fierce competition with imported cars.
VietNamNet
Vietnamese
