From early 2025, many imported cars from Europe to Vietnam will benefit from further tax reductions under free trade agreements, making the domestic market, especially the luxury segment, even more dynamic.

Luxury car prices drop thanks to FTAs

Under the EU-Vietnam Free Trade Agreement (EVFTA), import duties on automobiles from EU member countries such as Germany, France, Italy, and the Czech Republic will be reduced from 39%-42.5% to 31.2%-35.4% starting January 1, 2025.

Additionally, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will lower import tariffs on fully assembled cars from the U.S., Japan, and the U.K. from 42% to 35% from the same date.

With an average tax reduction of over 7% per year for imported cars from Europe, the U.S., and Japan, retail prices are expected to decrease proportionally.

This is welcome news for customers looking to purchase luxury imported vehicles from these regions. Moreover, the tariff reduction is expected to impact the overall size of Vietnam’s auto market.

According to the General Department of Customs, Vietnam’s automobile imports surged in 2024, reaching 173,561 units with a total import value of $3.62 billion - a 45.8% increase in volume and a 27.6% rise in value compared to 2023.

Southeast Asian nations like Indonesia, Thailand, and China accounted for the majority of Vietnam’s imported vehicles in 2024. Indonesia led in volume with 70,728 units worth $1.036 billion.

Thailand followed with 63,769 units, though it topped import value at $1.24 billion. China ranked third, supplying 31,112 vehicles worth over $909 million.

However, these three markets primarily export budget-friendly vehicles with lower unit values. Meanwhile, luxury and high-end vehicles - such as those from Mercedes-Benz, BMW, Audi, Porsche, and Land Rover, as well as premium models from Ford, Honda, Toyota, and Subaru - are mainly imported from the EU, U.S., and Japan.

Positive outlook for the luxury car market

Experts believe that lower import taxes on vehicles from Germany, the U.S., and Japan will bring positive changes, particularly to the luxury car segment. This policy also enables automakers and importers to plan long-term business strategies.

Speaking with VietNamNet, Nguyen Thanh Hai, CEO of Subaru Vietnam, explained that because both Japan and Vietnam are CPTPP members, the import tax on new Japanese cars (including Subaru models) is reduced by 6-7% annually. By 2027, the tax will be as low as 19-21%, depending on the engine capacity of each model.

According to Hai, the CPTPP tax cuts will facilitate the introduction of new models from member countries to Vietnam, as the gradual tax reductions make imports more attractive.

However, she cautioned that vehicle prices may not decline exactly in line with tax reductions, as other factors -including manufacturer pricing, foreign exchange rates, and local costs - also affect final retail prices.

“In pricing imported Subaru models like the Crosstrek, Outback, BRZ, WRX, and the upcoming new-generation Forester, we always consider tax policies, exchange rates, and operational costs to offer the best prices for customers,” Hai told VietNamNet.

A representative of a European luxury car import dealership also confirmed that EVFTA tariff reductions will significantly impact pricing, especially for high-end models. “For instance, if a luxury car imported from Europe is declared at customs at $200,000, a 7% tax reduction would lower its import cost by around $14,000. This savings is typically passed on to customers since fixed costs remain unchanged.”

The dealer further noted that Vietnamese consumers continue to favor imported cars due to their design, quality, and the fact that some models are not assembled domestically.

Lower taxes will make imports more competitive, leading many buyers to reconsider whether to choose a locally assembled vehicle or an imported one.

However, luxury car importers from Europe, the U.S., and Japan face challenges such as a limited customer base and market share. Additionally, as annual tax reductions lower import costs, unsold inventory from previous years becomes more difficult to clear, forcing dealers to apply steep discounts to avoid losses.

Marketing expert Nguyen Van Phuong believes that lower import taxes may encourage European and American automakers to enter the Vietnamese market with more budget-friendly models. Increased competition will benefit consumers by providing more choices at fairer prices.

However, Phuong also warned that an influx of imported cars may not necessarily benefit Vietnam’s still-developing automobile industry in the long run.

Without adequate government support and a sufficiently large domestic market, many automakers may prioritize imports over local manufacturing investments, slowing the industry's growth.

Hoang Hiep