Cheap cars flood into Vietnam

The price of imported cars from Indonesia to Vietnam's ports is only 289 million VND, the cheapest is the Indian car, averaging only 154 million VND/car. The most expensive and luxurious car is from Thailand, at 407 million VND.

From July 1, 2017, automobile business will be subject to business conditions and will certainly be strictly managed, in order to support the development of domestic automobile enterprises.

Difficult to prevent the advantage of imported cars

Cheap cars flood into Vietnam. Illustration photo from the internet

Currently, the import tax rate for complete vehicles from ASEAN to Vietnam is 40%. With this tax rate, domestic assembly still has an advantage.

However, up to now, cars imported from Thailand have flooded in and risen to the number one position. According to statistics from the Customs Department, in the first 10 months of 2016, imported cars reached 82,743 units, with a turnover of approximately 1.8 billion USD. Of which, 26,790 units were imported from Thailand. Thus, for every 3 imported cars, 1 comes from Thailand.

In terms of price, the average import price (CIF price, excluding taxes and fees in Vietnam) for each imported car to Vietnam is about 511 million VND. However, the price of imported cars from the two countries in the ASEAN region is even cheaper. Specifically, the price of each Indonesian car arriving at a Vietnamese port is only 289 million VND, while that of Thailand is 407 million VND. The cheapest is the Indian car, averaging only 154 million VND/car.

Currently, car imports from Indonesia are not many, only about 2,000 units since the beginning of the year. However, it is forecasted that there will be a strong increase in the future, especially in the 7-seat segment, equipped with small engines under 2.0L, due to many advantages.

With the above price, by 2018, businesses have considered reducing domestic production and increasing imports.

Ford Vietnam decided to import Everest cars in early 2016 and stop assembling them. Toyota Vietnam also stopped assembling and switched to importing Fortuner models for distribution in 2017, even though this is a model with high sales in Vietnam. Honda Vietnam, after more than a decade of assembling Civic models, has also switched to importing from Thailand for distribution.

The simple reason is that domestic car assembly no longer has many advantages.

According to calculations by businesses, the current cost of manufacturing and assembling cars in Vietnam is about 23% higher than in Thailand and Indonesia. Meanwhile, the production of car businesses in Vietnam has not reached the scale to bring about efficiency.

In just over a year, the price of domestically assembled cars will be equal to the price of imported cars, so domestic cars will hardly be able to compete. Thus, in addition to having to lower the price of domestic cars to compete, it is necessary to maintain the price of imported cars higher to create enough advantage - this is not easy to do.

Will it work?

Some domestic car assembly enterprises have switched to importing some car models. (Internet photo)

To narrow the gap in production costs of domestic cars compared to imported cars, FDI auto companies once proposed that the Government support each assembled car with about 1,000 USD, but this was not possible.

According to calculations, in 2018, to have the price of imported cars from ASEAN equal to the current price, the tax price must be increased by at least 3,000 USD. However, the tax price cannot be increased by any amount, it must be based on the selling price of the manufacturer in the regional market. Raising the tax price is also a solution. Currently, thanks to maintaining high import tax, only needing to increase the tax price of an imported car by 1,000 USD, the selling price will increase by 2,600-3,600 USD. However, when the import tax is 0%, increasing the tax price by 1,000 USD, the selling price will only increase by about 500 USD, not to mention the special consumption tax on cars with a capacity of 2.0L or less, which will continue to decrease in the near future.

It is also very difficult to erect technical barriers, because Vietnam's standards are lower than those of other countries.

Many opinions say that it is very difficult to prevent cheap imported cars from flooding into Vietnam since 2018. To successfully develop the automobile industry, it is necessary to create cars with good quality and competitive prices with imported cars. But currently, the supporting industry is weak, the localization rate for cars with 9 seats or less is very low, to develop it will require a lot of time, money, and breakthrough policies.

Recently, answering questions from National Assembly deputies, Minister of Industry and Trade Tran Tuan Anh only said that he will try to focus on prioritizing appropriate tax policies and mechanisms and incentives to support and encourage businesses, especially large businesses, with large-scale projects that create efficiency and spread.

Time is running out, the question is how to build policies to promote the development of the automobile industry, so that domestic enterprises can compete fairly with imported cars and participate in the global production chain. It seems that the road to success for the Vietnamese automobile industry is still extremely difficult./.

According to Vietnamnet