Tax-free cars flood in, can people buy cheap cars?

According to preliminary statistics from the General Department of Customs, from the beginning of the year to mid-July, the country imported 16,061 complete cars of all kinds, with a total value of over 405 million USD. Of which, the majority were cars with 9 seats or less.

Occupying the exclusive position are still cars originating from Thailand and Indonesia, enjoying 0% import tax under the ASEAN Trade in Goods Agreement (ATIGA).

Duty-free cars packed Tan Vu port, Hai Phong.

From July 27 to August 2 alone, the number of imported complete cars of all kinds increased sharply with 1,935 units with a total value of 39.7 million USD. Notably, in addition to Thailand, Indonesia and South Korea,Of the nearly 2,000 imported cars last week, 54 were from India, mostly cars with 9 seats or less.

Imported cars have begun to flood in, causing concern among domestic car manufacturers and assemblers. According to forecasts from the auto industry, it is likely that many car models will increase in price this August morning. The reason is that the USD exchange rate has recently increased compared to VND.

According to calculations, for every 500 VND increase in the USD, importing a 10,000 USD car costs an additional 8-9 million VND. This is because at the beginning of 2018, the USD exchange rate compared to VND was 22,700 VND, and has now increased to over 23,000 VND, an increase of about 1.5 percentage points. Meanwhile, most car assembly components must be imported and payment is made in USD. Therefore, the increase in the exchange rate is increasing production costs and putting pressure on car prices.

Mr. Le Ngoc Duc - Director of Hyundai Thanh Cong Automobile Company said that with the current USD price at over 23,000 VND, car prices will have to be adjusted up by 1.5%. However, the company still decided not to increase prices at this time because it will affect car consumption and CPI index.

Although the reason has not been announced, some domestically produced and assembled car models have had their prices adjusted up, by about 1-2%. For example, Nissan Vietnam has adjusted the selling price of two domestically assembled car models, X-Trail and Sunny, by 10-23 million VND since July 16.

“In principle, any business must calculate based on cost price. When cost price increases, the output price of the product will also increase. Exchange rate is one of the factors that make up the input price of the product. The fluctuation and increase of USD exchange rate in recent times has affected not only cars but also a series of other products, causing prices to be adjusted. In the short term, companies mainly wait and watch the market developments. However, with the trend of exchange rate continuing to increase, companies will certainly have to adjust car prices up,” Mr. Duc analyzed.

Mr. Pham Anh Tuan, Head of the VAMA Policy Subcommittee, said that sooner or later, car manufacturers will have to adjust car prices upward. “Parts are imported, cars are imported, most of them depend on the USD. Therefore, depending on their endurance and competitiveness, manufacturers will make appropriate adjustments. Of course, the price increase will mainly occur with models that have competitive advantages, and for cars that are not selling well, businesses will not be able to increase prices further,” Mr. Tuan analyzed.

On that basis, Mr. Tuan predicts that imported cars will have to adjust their prices first because they are more affected by the USD exchange rate.

Economist Nguyen Duc Thanh said that the increase in the USD exchange rate does not necessarily cause the price of cars to increase, because businesses often sign forward contracts with partners, and have calculations and projections in advance. "For example, I agreed to buy 100 tons of rice from you, the exchange rate was fixed in advance, not when the rice was delivered," Mr. Thanh cited.

According to the expert, depending on the level of the market and the level of competition between imported and assembled cars, each side will adjust prices up or accept losses and reduce prices to stimulate shopping.

Dr. Nguyen Duc Thanh predicts that the upcoming automobile market will be more vibrant, consumers will have more choices, but they can only buy cars at a more reasonable price, not cheaper than other markets in the region.