Imported cars worth 1 billion VND reduced by more than 200 million VND: Domestic cars drastically reduced in price
Contrary to the optimistic statements of some automobile companies when affirming that imported car prices will decrease, possibly from mid-2018, many actions from management agencies show that this possibility is unlikely. On the contrary, domestic car prices have conditions to decrease sharply.
Foreign car prices will decrease from mid-year?
Speaking at a recent conference of the Ministry of Industry and Trade, Mr. Le Ngoc Duc, General Director of Hyundai Thanh Cong Company, said that sooner or later, cheap imported cars will flood into Vietnam. According to calculations, with the import tax rate on cars from the ASEAN region reduced to 0%, the retail price of completely imported cars to Vietnam could be reduced by 23-25% compared to the current price.
Mr. Duc said that the regulations in Decree 116 on related documents and procedures such as automobile import business licenses, automobile type quality certificates, factory release notes, or factory quality assessment documents, etc. are all short-term solutions.
Once the coordination processes between importers and foreign car manufacturers are unified, there will be no difficulty in bringing cars to Vietnam. From there, the trend of importing completely built-up cars to Vietnam will continue to increase, Mr. Duc commented.
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| By mid-2018, will imported car prices decrease? |
Many businesses also agree with this assessment. At the recent launch of the BMW and Mini car brands in Vietnam, Mr. Paul de Courtois, CEO of BMW Group Asia, said that in the near future, the requirements of Decree 116 on type quality certificates for imported BMW and Mini car models will be met.
Information from businesses also shows that in the ASEAN region, some car exporting countries are also considering a proposal to conduct testing and issue type quality certificates for right-hand drive vehicles for export to Vietnam. It may be necessary to amend the law and conduct testing, which will take more time, but obtaining this certificate is not too difficult for car importers. Some businesses predict that imported cars may arrive in Vietnam in mid-2018.
Is there hope?
With a price 23-25% cheaper than the current price, an imported car with a retail price of 1 billion VND will be reduced by more than 200 million VND. Combined with the Vietnamese people's preference for imported products, imported cars will have a great advantage.
Currently, cheap imported cars have not arrived in Vietnam, even though import tax from ASEAN has been reduced to 0%, because they are still stuck with type quality certificates, which have not been obtained from competent authorities in the exporting country.
Up to this point, the circular guiding Decree 116 has not been issued. What businesses are most interested in is the specific instructions on the quality certificate of imported automobile types, stipulated in this circular. When there are specific instructions, importers will apply for it from competent authorities in the vehicle exporting country.
However, whether cheap imported cars will flood into Vietnam or not depends on other factors. The Ministry of Industry and Trade, in its 2018 mission orientation, stated that there will be a number of measures to strictly control the amount of imported cars and support domestic production.
The mentioned measures to control imported cars are to strengthen strict management of taxable value, origin of imported cars and to prevent trade fraud. That is, only car models that actually achieve a 40% domestic content rate within the bloc will enjoy 0% tax incentives. In addition, the import tax price for many car models may be adjusted upward, along with anti-fraud measures such as false price declaration, declaration of import price lower than actual, etc.
In the long term, the Ministry of Industry and Trade will build technical barriers to manage the quality of imported automobiles. Recently, the Ministry of Science and Technology and the Ministry of Transport have just reported to the Government on building standard barriers for automobiles in Vietnam, with a total of 300 standards and regulations expected. These are technical barriers for imported automobiles at the time when import tax on automobiles from ASEAN is reduced to 0%.
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| Will consumers be able to buy domestically at cheap prices? |
According to the General Department of Customs, the import turnover of cars with less than 9 seats in 2017 reached nearly 39,000 units, a decrease of more than 10,000 units compared to 2016; however, the import value increased, reaching 717 million USD. On average, the pre-tax price of imported cars was 420 million VND/unit, an increase of more than 100 million VND compared to the price in 2016.
The decrease in quantity while the price increases is believed to be due to the policy of strictly controlling the import of cars into Vietnam. If imported cars are controlled even more tightly in 2018, it is predicted that the price of cars will hardly decrease.
Domestic car prices will drop sharply?
The Ministry of Industry and Trade said that in 2018, it will consider solutions to support domestic production. Specifically, it will propose to handle issues related to adjusting import taxes on components and spare parts, in principle lower than the import tax on finished cars, according to the signed commitment.
Currently, with the new regulation, from January 1, 2018, large-scale automobile manufacturing and assembly enterprises will have their import tax on all components reduced to 0%. This has helped enterprises reduce the retail price of assembled products by 12-15%.
If automobile manufacturing and assembling enterprises enjoy additional incentives of 0% special consumption tax on domestically purchased components; if component manufacturing enterprises have their import tax on raw materials and input materials reduced to 0%, the cost of domestically assembled vehicles will decrease. Domestic car prices will be cheaper than imported cars and consumers will benefit.
However, the Ministry of Finance recently disagreed with the proposal to offer special consumption tax incentives for domestically manufactured and assembled cars, due to concerns about violating WTO commitments.
However, this proposal has been included in the Draft Amendment to Tax Laws, which will be submitted to the National Assembly for consideration and approval in 2018. If approved, from 2019, domestic cars will receive preferential treatment on special consumption tax and car prices will decrease significantly compared to present.
