Cheap passenger cars from India are flooding into Vietnam.

India is leading and is the largest exporter of passenger cars with fewer than nine seats to Vietnam.

The General Department of Customs has just released the import figures for automobiles in July and the first seven months of the year. Accordingly,Thailand is the leading exporter of automobiles to Vietnam with nearly 18,840 units, but these are mainly trucks and pickup trucks. The number of vehicles with fewer than 9 seats is only over 4,300. In addition, South Korea, India, China, and Japan are also major exporters of vehicles to Vietnam.

India leads in exporting vehicles with fewer than nine seats to Vietnam.

Although India ranks only third in terms of car volume (after Thailand and South Korea) with over 7,930 vehicles (US$55.7 million), it is the number one exporter of passenger cars to Vietnam with approximately 7,500 units. The average price of each Indian car upon arrival at the port is around US$7,000.

In July, 1,887 cars were imported from India, with an average import price of over $5,100, indicating a trend towards increasingly lower prices.

According to the General Department of Customs, in 2015, Vietnam imported approximately 51,500 passenger cars, with India accounting for half, or 25,000 vehicles, representing a growth rate close to triple digits. The cars imported from India are mainly small models such as the Hyundai Grand i10 and the 7-seater Suzuki Ertiga...

According to Mr. Nguyen Tuan, Director of Thien An Phuc Co., Ltd., a company specializing in importing automobiles, India is considered a market for low-priced mass-market cars. Common passenger cars are sold very cheaply there due to government policies that prioritize businesses developing the production of small, inexpensive vehicles.

Therefore, numerous global automotive corporations have invested heavily in the country to mass-produce small cars. With significant incentives and low labor costs, Indian passenger cars are optimized for cost efficiency and highly competitive in terms of price. This is why the price of Indian cars arriving at Vietnamese ports is lower than the general market average.

However, Mr. Tuan also stated that most passenger cars imported from India meet Euro 2 standards – lower than the Euro 4 standard that Vietnam will soon adopt. When these low-quality models become outdated, manufacturers will push them to markets with high demand, such as Vietnam.

In particular, Mr. Tuan believes that the strong growth in the import of inexpensive passenger cars from India is due to the emergence of several new taxi companies in Vietnam, which have a great need to expand their networks and upgrade their vehicle fleets. Accordingly, these cars are mainly imported to serve passenger transportation.

Indian cars are very competitively priced compared to similar products.

"Although the base price is low, after adding taxes and fees, the selling price of the Grand i10 on the market ranges from approximately 350-460 million VND, depending on the version. As for the Suzuki Ertiga, the price ranges from 500-600 million VND. For each car imported into Vietnam, businesses only make a profit of about 40-60 million VND," Mr. Tuan said.

Because India is not among the countries with trade agreements with Vietnam, cars from India still face import tax rates of around 68%, higher than the preferential rate of 40% offered by ASEAN countries. However, smaller cars from India typically have smaller engine capacities. According to the new Special Consumption Tax Law, car models with engine capacities under 1.5 liters will see their tax rate reduced from 45% to 40% from July 1st, and further reduced to 35% at the beginning of 2017. Cars with engine capacities between 1.5 and 2 liters will see their tax rate reduced to 40%. This tax reduction is considered to have created a significant advantage for cars from this country.

According to importers, cars from India are a new force in the Vietnamese market, offering a price advantage over some domestically assembled models in the same segment. Generally, consumers still prefer fully imported products over domestically assembled ones. Indian passenger cars also tend to be more fuel-efficient due to their smaller engines.

Besides India, Thailand and South Korea are also two countries with a significant volume of imported passenger cars into Vietnam. According to the Vietnam Automobile Manufacturers Association (VAMA), in the first seven months of the year, the country consumed approximately 162,000 cars of all types, including 60,600 imported cars and 91,000 domestically assembled cars.

According to VNE