Imported cars down 200 million, domestic cars preparing for 'price collapse'

The first batch of cars imported to Vietnam to enjoy 0% tax has completed quality inspection procedures. From now until the end of March, this batch of cars will arrive at dealers and be delivered to customers. Thus, the quality inspection time has been significantly shortened, to just over 2 weeks instead of 1-2 months as initially predicted. In addition, the registration fee is only about 50 million VND/car in a batch.

Foreign car price equal to domestic car price

Comparing the prices of imported cars, announced by Honda Vietnam, shows that the price level has not decreased significantly compared to domestically assembled cars. However, as soon as there was information about 0% tax on imported cars, dealers reduced the price of used cars by about 200 million and the announced price of new cars has also decreased accordingly.

For example, the Honda Jazz model has a price equivalent to the domestically assembled Ford Fiesta model. These are two models in the same B-segment and are competitors to each other. The Honda Jazz has 3 versions, priced from 539-619 million VND, while the Fiesta hatchback has 2 versions priced from 564-616 million VND.

Other imported Honda models such as Accord 2.4L have a selling price of 1,198 million VND, lower than the announced price of Toyota Camry 2.5Q assembled domestically by 1,302 million VND, but compared to the actual selling price, it is only about 50 million VND lower.

The Honda Civic 1.8L version has the same price as the Toyota Altis 1.8L, while the turbocharged 1.5L version is still much more expensive than the Ford Focus 1.5 Ecoboost. The price of the Honda CR-V is also on par with the price of the Mazda CX-5.

Many customers said they hoped that imported cars would be cheaper than domestic cars because they enjoy a 0% import tax rate. However, the above selling price is not cheaper at all. Some people say that Honda Vietnam is allowed to have an average taxable price of only 480 million VND/car, which could lower the selling price. However, because it has to mobilize a huge financial resource to transport a large batch of cars back to the country, the cost is high. Moreover, because imported cars have not arrived in large numbers, the market is still scarce, so the price cannot be reduced significantly.

However, the important thing is that the door for imported cars has been opened and more and more imported cars will come to Vietnam in the near future. The Vietnam Automobile Manufacturers Association (VAMA) said that Indonesia will soon issue type quality certificates for cars exported to Vietnam. At that time, more cheap imported cars will flood into the country and will push down the price level of cars in the market.

Domestic cars discounted

As long as the price of imported cars is equal to the price of domestic cars, many customers will choose imported cars because Vietnamese people still prefer foreign goods, said a sales staff at Honda Tay Ho car dealership (Hanoi).

Information from some car dealers shows that the number of customers signing contracts to buy domestically assembled cars has been decreasing since the beginning of March 2018. Partly because after Tet, demand decreased and many people are looking towards imported car models.

Assembled cars will have to reconsider their selling prices. If many cars are imported with 0% tax, they will certainly have an advantage over domestically assembled cars. To compete, domestic cars will have to lower their prices.

"First of all, we will ask our partners and foreign component suppliers to share to get a more reasonable price and aim for long-term development in the Vietnamese market. Along with that, we must rearrange production, optimize all activities and increase output. Only then will we have a reasonable selling price and compete with imported cars" - said the director of a domestic automobile company.

Enterprises also predict that imported car prices will decrease further when cheap cars flood in. To compete, domestic cars must also calculate, at least have a selling price equivalent to imported cars. Any domestic car model with a higher selling price compared to imported cars in the same segment will certainly have difficulty surviving. With the sharing of foreign partners, along with the rearrangement of production, increasing the localization rate, and increasing output, enterprises believe that domestically assembled cars will have reasonable selling prices. In the coming time, many domestically assembled car models will have reduced prices.

However, according to businesses, when imported cars are heavily discounted, domestic cars will find it difficult to compete without breakthrough policies. One of the wishes of domestic auto businesses is to be exempted from taxes on domestically purchased components.

Some sources said that the Government will submit to the National Assembly for consideration to amend 5 tax laws, including the Law on Special Consumption Tax, at the upcoming session. If automobile enterprises are exempted from tax on domestically purchased components, it will help promote localization and reduce costs. A new price level will be established, and the automobile market will be vibrant.