Domestically produced and assembled cars will decrease in price by about 20%?

Imported cars are likely to be blocked by technical barriers, while domestically produced and assembled cars receive many incentives. From 2018, domestic car prices are expected to be more affordable.

After Decree No. 116/2017/ND-CP regulating the conditions for production, assembly, import and business of automobile warranty and maintenance services was signed and issued by the Prime Minister, many opinions said that imported cars would hardly flood into Vietnam.

In addition to strict regulations on imported cars, in the coming time, there will likely be more barriers. Along with that, the tax price of many imported car models may be raised. Thus, even if imported cars enter Vietnam, the price may not be cheap.

Imported cars are likely to be blocked by technical barriers, making it difficult to flood into Vietnam.

Meanwhile, from 2018, the import tax rate on auto components and spare parts from ASEAN to Vietnam will be reduced to 0%. Currently, FDI enterprises import about 70-80% of components from ASEAN, while 20-30% imported from outside the region are subject to tax. Thus, the average import tax on components will be only about 5% from 2018. Currently, the average import tax on components is from 14-16%.

In addition, the Ministry of Finance also proposed to reduce import tax on auto parts to 7-11% for all markets. When import tax on parts is reduced, domestic car prices have the opportunity to decrease accordingly.

Along with that is the proposal to not impose special consumption tax on the value created domestically. This is considered a great incentive for automobile enterprises. The value created domestically, including localized components, labor, depreciation of machinery, factories, etc. The more domestic components a business uses and invests in modern machinery, the more beneficial it is.

In addition, it is proposed to adjust corporate income tax for large-scale automobile manufacturing and assembly projects, regardless of investment location; apply incentive policies on investment credit for domestic automobile manufacturing and assembly activities.

These policies will help promote the development of the domestic auto industry and car prices will be cheap.

From 2018, domestic car prices are expected to be cheap.

Just by not imposing special consumption tax on domestically produced value, it is estimated that car prices will drop sharply.

For example, cars with a capacity of 2.0L in 2018 will have a special consumption tax rate of 40%. If a company imports a complete car for distribution, with a price of 10,000 USD, the special consumption tax will be 4,000 USD. But if a car company imports a set of components for assembly in Vietnam, with a value of only 8,000 USD, the special consumption tax will only be 3,200 USD.

Moreover, if enterprises increase the purchase of domestic components and reduce imports, that is, increase the localization rate, they will benefit even more. For example, if a business only imports 50% of the value of a component set of 4,000 USD, the special consumption tax will only be 1,600 USD.

According to calculations, if enjoying the above incentives, in the coming time, domestically assembled cars will also have the condition to reduce prices by about 20%, car prices will be cheap and compete well with imported cars.

Mr. Nguyen Minh Dong, an auto expert, commented that although the incentive policies were proposed quite late, it is better late than never. Thanks to that, it will support domestic auto companies to invest in better technology, expand their scale and improve product quality.

Many opinions say that Vietnam's automobile industry is weak compared to other automobile manufacturing countries in the ASEAN region, so it needs to be supported to develop. From there, create a market for domestic automobiles with competitive prices to promote the development of the automobile industry.

According to VNN