Car prices are inflated, traders earn 500 million/car profit
Contrary to many people’s expectations, the number of imported cars to Vietnam in the first 6 months of 2018 was quite small due to strict control. Therefore, the shortage of popular car models is an opportunity for businesses and dealers to raise prices. On the contrary, with the advantage, domestically assembled cars increased production and prices decreased.
According to the General Department of Customs, in the first 6 months of 2018, the number of imported cars to Vietnam reached 12,380 vehicles, down 75.7% compared to the same period in 2017.
According to the Automobile and Motorcycle Working Group of the Vietnam Business Forum (VBF), the impact of Decree 116 has caused almost all imported car sales from Japan, Europe, etc. to stop in the past 6 months. A series of imported car orders for the first months of 2018 were canceled, affecting import companies as well as car dealers.
Vietnam imports about 100,000 cars of all kinds each year. The number of imported cars in the first 6 months of 2018 was too small, leading to a shortage of goods. Many imported car models, although enjoying 0% tax, are still priced sky-high. The HR-V model imported by Honda Vietnam has an estimated price of less than 900 million VND; the resale price is quite "expensive" compared to what many people imagine. A series of other imported car models are also at high prices, such as Honda CR-V, or Toyota Fortuner,...
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| Imported cars are scarce so prices are hard to reduce. |
Importers also say frankly that they will sell at the price accepted by the market. That is, if the imported car costs 700 million VND, but the market accepts it at 1 billion VND, they will sell it for 1 billion VND. This is because imported cars are scarce. The shortage of popular car models is an opportunity for businesses and dealers to raise prices.
It is forecasted that from the third quarter onwards, car imports will increase sharply compared to the first two quarters of the year, as businesses gradually adapt to the new regulations. However, the number of cars imported will not be as high as last year. According to businesses, perhaps it will be in 2019 that things will become smoother for imported cars and the number of imported cars will be higher. Only then will we consider reducing prices.
Therefore, even though dealers do not sell many cars during this period, they still make a lot of profit. Hot car models can make a profit of 300 - 500 million VND.
However, this depends on the control of imported cars by the authorities. In the coming time, imported cars will continue to be strictly controlled.
Therefore, some businesses proposed to remove the regulation that imported cars must present a Type Quality Certificate and inspect each batch of cars (only the first imported batch of new car models will be inspected).
However, this proposal did not receive approval from the authorities.
The Ministry of Transport believes that this is one of the initial bases for inspection and certification of technical safety and environmental protection quality according to current regulations. Failure to inspect the quality of each batch will create a big loophole for importers to cheat and bring in poor quality goods, affecting the interests of consumers.
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| Domestically assembled cars have the opportunity to increase production. |
According to car importers, the current time for emissions and safety testing for a batch of cars lasts up to 3 weeks. In the near future, when the number of imported cars increases, the waiting time for testing will be even longer. This will affect the delivery schedule and increase the cost of imported cars.
Not only that, the Government also requires the Ministry of Industry and Trade to strictly control the origin and localization rate of cars in the ASEAN bloc when imported into Vietnam to enjoy 0% tax incentives. Along with that, direct competent agencies to research and build technical barriers to manage the quality of imported complete cars.
The Ministry of Industry and Trade also affirmed that there will be measures to control the amount of imported cars to promote the domestic automobile industry. Many people hope that imported cars with 0% tax will flood in, and the prices of cars will be cheaper. However, this is not likely to happen.
Meanwhile, domestically assembled cars are benefiting. Figures from the Ministry of Industry and Trade show that automobile assembly production in the first 6 months of the year recovered strongly, reaching 114,600 vehicles of all types, up 15.5% over the same period in 2017.
To support domestic production, the authorities have proposed adjusting import taxes on components and spare parts to be lower than the import tax on finished cars. Along with that, no special consumption tax will be imposed on the value created domestically.
