Locally assembled cars drive a tough road ahead

VietNamNet Bridge – In principle, it is now the high car sale season. However, analysts do not think that the demand would be high, because the dollar is still very expensive. Meanwhile, the Ministry of Finance (MOF) is planning to slash import tariffs on car imports under the mode of complete built units (CBU).

Tariff cuts planned

MOF has put forward the tentative import tariffs to be applied to cars commencing from early 2011, while it is consulting with the Vietnam Automobile Manufacturers’ Association (VAMA) on the issue.

MOF plans to reduce the import tax rate on less-than-9-seat cars (group 8703) from 83 percent currently to 70 percent applied to the imports from ASEAN countries. Meanwhile, the imports from other regions will still remain at 83 percent in 2011.

As for 4WD models, which now have the tariff of 83 percent as per ASEAN commitments, the tariff has been proposed to reduce to 70 percent. The imports from other regions would be lowered to 73 percent from 2011 from the current level of 77 percent.

As for the cars with the cylinder capacity of 2500 cc and higher, the inner-ASEAN import tariff from 2011 would be 70 percent instead of the current tax rate of 83 percent. Meanwhile, the tax rate on the imports from other regions would be 77 percent.

Regarding passenger-carrying vehicles with more than 10 seats, including buses, the proposed tax rate is 70 percent (lower than the current rate of 83 percent).

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. Meanwhile, MOF does not have the same plan for trucks: it intends to slash the tariffs more sharply than the committed levels.

Analysts have said that the tariff reduction from 83 percent to 70 percent will surely affect the market, because not only import tariff will decrease by 13 percent, but luxury tax, VAT and ownership registration tax will also decrease. For example, a car valued at $20,000, will be sold at $20,000 + $16,600 (83 percent in import tax) + $18,300 (50 percent in luxury tax) + $4,490 (10 percent in VAT) = $59,390. Besides, buyers will also have to pay the ownership registration tax of 12 percent if they are in Hanoi or HCM City.

Meanwhile, if the import tariff reduces to 70 percent as expected, the price of the car would be $56,100 only, or $3,000 lower than the previous level.

Buy right now or wait?

“Buy right now or wait?” is the question many people have raised for themselves in the context of possible tariff reduction and dollar price fluctuations.

As the dollar price keeps increasing, buyers would have to pay additional money of up to tens million dong, when they buy cars. Therefore, if they do not buy cars right now, they will have to pay higher for the same cars in the future.

However, as the tariffs are expected to decrease, it would be more profitable to buy cars in the future, when the tariffs are lower and the sale prices become cheaper.