'Race' to stimulate car demand before new tax

Many car companies have begun to compete to launch discount and promotion programs to stimulate purchasing power in the market...

Consumers who purchase genuine BMW vehicles during June 2016 will only have to pay half the registration fee when registering their vehicle.

As of July 1, 2016, less than a month from now, the Law amending and supplementing a number of articles of the Law on Value Added Tax, the Law on Special Consumption Tax and the Law on Tax Administration will officially take effect.

Accordingly, the special consumption tax rate for imported completely built-up (CBU) cars will have significant adjustments.

Specifically, vehicles with engine cylinder capacity from 1,500 cm3 or less will be reduced to 40% instead of the current 45%; vehicles with engine cylinder capacity from 1,500 cm3 to 2,000 cm3 will remain at 45%; vehicles with engine cylinder capacity from 2,000 cm3 to 2,500 cm3 will remain at 50%; vehicles with engine cylinder capacity from 2,500 cm3 to 3,000 cm3 will increase to 55% instead of 50%.

Most notably, the group of vehicles with cylinder capacity of over 3,000 cm3 will simultaneously increase to 90%, 110%, 130% and the highest is 150%.

Although the new tax law only applies to CBU cars, at present, many car companies are competing to launch discount and promotion programs to stimulate purchasing power in the market.

Quietly but quite aggressively is Ford. According to the retail price list posted on the official website, Ford Vietnam has started applying preferential prices for a series of car models.

In particular, the popular urban SUV model EcoSport has a price reduction of 23 million VND for all versions, the Focus model equipped with the 1.5 liter EcoBoost engine generation has a price reduction of 31 million VND, the small car Fiesta has a price reduction of 21 million VND, and the Ranger XL pickup truck has a price reduction of 15 million VND.

The car company that is most willing to reduce prices is Truong Hai (Thaco), which also continues to apply preferential prices for some car models under the Kia and Mazda brands.

For the Kia brand, the model that enjoys a discount is the Morning with a discount of 7 million VND for the XL MT 1.25 liter version and 9 million VND for the Si AT 1.25 liter version. The only model with the Mazda brand is the Mazda2 that enjoys a discount of 15 million VND.

Among the luxury brands, BMW is the most enthusiastic. Although it does not directly reduce retail prices, distributor Euro Auto applies a preferential package.

Specifically, consumers who purchase genuine BMW vehicles (except for Series 1, Series 2 and 320i models) during June 2016 will only have to pay half of the registration fee when registering the vehicle, the other half will be paid by BMW. In addition, the first 20 customers who disburse in June from BMW financial services supported by banks will enjoy a 0% interest rate in the first month...

It is noteworthy that the stimulus program applied by many car manufacturers applies to both domestically manufactured and assembled products (CKD), not just CBU cars.

CKD is a group of vehicles that are not subject to the new tax law. Business people believe that this move is a way to increase sales before having to accept a decline in sales due to the increase in retail prices of CBU vehicles due to the new tax.

In fact, special consumption tax from July 1, 2016 only increased for vehicles with engine cylinder capacity of over 2,500 cm3 and vice versa, vehicles with engine cylinder capacity of 1,500 cm3 or less decreased slightly.

However, this does not mean that imported small cars will be discounted from July 1. Because, since the beginning of this year, CBU cars have been subject to a new method of calculating special consumption tax.

Specifically, the special consumption tax has been calculated on the wholesale price of the importer instead of on the CIF price plus import tax. With these calculations, in essence, the retail price of CBU vehicles has increased since the beginning of the year. However, in the period from the beginning of the year until now, most car manufacturers are accepting to "lose" the price difference to avoid shocking consumers.

Representatives of some genuine imported luxury car brands said that currently the number of consumers coming to showrooms and dealers to buy cars “to avoid taxes” is increasing very strongly. However, the number of cars available for consumers to sign contracts is quite limited.

Because, with most luxury brands, usually only after the consumer signs a car purchase contract, the distributor or importer will import the car into the country. Meanwhile, the time from signing the contract until the car arrives at the customs gate usually takes 3-6 months. Knowing that most luxury cars are imported directly from Europe or the US, some brands such as Lexus or Acura are imported from Japan and have a shorter time to arrive in the country.

According to VnEconomy