VietNamNet Bridge - The domestic automobile market witnessed a boom in 2015 with a series of records, but concerns still exist as manufacturers worry they cannot compete with imports after import tariffs are cut. And customers fear the prices will fall as a result of tax policies. 

Customers fear the prices will fall as a result of tax policies.

Under the ATIGA (ASEAN Trade in Goods Agreement), Vietnam will have to cut the import tariff on car imports under the mode of complete built units (CBU) to zero percent by 2018. This means that car prices might go down.

However, contrary to all predictions, prices will escalate as a result of changes in the luxury tax law.

Under Decree 108 dated October 28, 2015, the luxury tax on car imports will be calculated on importers’ wholesale prices instead of CIF prices + import tariffs.

The new tax may cause difficulties for both domestic manufacturers and importers, though in theory, the new policy would impact CBU importers.

The problem is that the number of CBU products imported by domestic manufacturers accounts for a high proportion of their products.

Also regarding the luxury tax, the draft law on amending some provisions of the Special Consumption Tax would be put into discussion at the National Assembly’s session which takes place from mid-October to the end of November 2015.

Under the ATIGA, Vietnam will have to cut the import tariff on car imports under the mode of complete built units (CBU) to zero percent by 2018. This means that car prices might go down.

Under the draft law, the tax rates on the majority of car models with the cylinder capacity of 2.0L and higher would increase from mid-2016.

If the luxury tax draft law takes effect, analysts warned, the retail prices of cars would increasing significantly, and therefore, would affect production and business of both domestic manufacturers and CBU importers.

However, concern about the new policies helped create a boom in the car market in 2015. People rushed to buy cars, especially CBU imports.

A report of the Vietnam Automobile Manufacturers Association (VAMA) showed that 21,366 cars were sold in September 2015, an increase of 17 percent compared with August and 32 percent compared with the same period in 2014.

The demand soared in the last months of 2015 with 22,368 cars sold in October and 29,706 in November. The boom in the last few months helped sales in the first 11 months of the year soar by 57 percent in comparison with the same period in the previous year.

They also believe purchasing power will increase at least for three months more until the new National Assembly’s session convenes and discusses the draft law.


TBKTVN