5 factors strongly affecting car prices in 2019

1. Draft to increase registration fees for pickup trucks

The Ministry of Finance has proposed a draft to increase registration fees for pickup trucks carrying goods under 1.5 tons and 5 seats or less. Specifically, the registration fee for pickup trucks registered for the first time will increase to 60% of the registration fee for passenger cars, within the range of 10-15%. For pickup trucks registered from the second time onwards, the fee will be reduced to 2%.

For pickup trucks registered for the second time or more, the fee will be reduced to 2%. If this draft is approved by the Government, Vietnamese consumers will have to pay a first registration fee 3-4 times higher than the current rate, which means the price of pickup trucks will increase.

2. Draft to increase special consumption tax on pickup trucks

The pickup truck market also received a proposal to increase special consumption tax from the Ministry of Finance. Accordingly, the Ministry of Finance proposed to apply a special consumption tax rate for pickup trucks equal to 60% of that of cars with less than 9 seats, with the same cylinder capacity. It is known that this type of vehicle on the market is only subject to a regional import tax of 5% and a special consumption tax of 15-25%. However, with the above proposal, the special consumption tax on pickup trucks will increase to 30-45%.

Pickup trucks are one of the fastest growing segments in the Vietnamese automobile market. Therefore, increasing taxes and fees for this vehicle line will slow down the growth of the pickup truck market.

3. Cars over 1.5 billion VND may be subject to property tax.

The Ministry of Finance is considering collecting opinions from ministries, sectors and localities on the draft Law on Property Tax and will submit it to the Ministry of Justice and the Government. Accordingly, it will propose additional subjects for taxation, including aircraft, cars and yachts.

Property tax will have two options for assets such as airplanes, yachts and cars. Specifically, option 1 will tax assets worth VND1.5 billion or more and will not tax vehicles worth less than VND1.5 billion or used only for business, transporting goods and passengers. Option 2 is to not tax the above vehicles.

Regarding tax rates, the Ministry of Finance also proposed two options as follows: Option 1 applies a general property tax rate of 0.3%, Option 2 is 0.4%.

The taxable price for cars valued at VND 1.5 billion or more is the value of the property at the time of tax calculation as determined by the provincial People's Committee. For used cars, the taxable price is the value of the new property multiplied by the percentage of the remaining quality of the property as determined by the provincial People's Committee according to the time of use of the property at the time of tax calculation.

Thus, car owners with cars worth from 1.5 billion VND will likely have to pay an additional property tax of 0.3-0.4% if the above proposal is passed.

4. Import tax on cars from EU reduced to 0%

The approval of the EVFTA by the EU will change the price of imported cars from Europe to Vietnam and vice versa. Specifically, the EVFTA Trade Agreement will help reduce import taxes on cars from Europe to 0%. The tax reduction roadmap for cars is 7 years, and for light trucks will be 10 years from the effective date of the EVFTA.

Currently, the import tax on cars from Europe to Vietnam is 74% for passenger cars with a cylinder capacity of over 3,000cc, 78% for passenger cars with a cylinder capacity of under 3,000cc and 65% for trucks under 5 tons (pickup trucks).

With tax reduction, car prices are also expected to drop sharply. At this time, there are many European car brands that have official distributors in Vietnam such as Mercedes-Benz, BMW, Audi, Land Rover, Lamborghini...

5. AgreementCPTPP

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) has been officially signed by 11 member countries. Accordingly, products from countries in the CPTPP bloc when entering Vietnam will be subject to a 0% tax rate and vice versa, including cars. Currently, in the CPTPP bloc, Vietnam is importing cars from 2 countries, Japan and Canada.

The agreement was signed, and consumers hoped that car prices would drop sharply. However, many people are no longer interested in cheap cars after their dreams of cheap cars were shattered by the reduction of import tax on cars from ASEAN to 0%.