Auto market 2013: Sales increase with concerns about "roadmap"

Although it was considered a difficult economic year, however, when "closing the books" in 2013, the Vietnamese automobile market had a growth rate beyond expectations - up 19% compared to 2012, reaching more than 110,519 vehicles, including nine consecutive months of increase compared to the same period in 2012.

Although accounting for a relatively low proportion, imported cars are growing at a higher rate than domestically assembled cars.

Imported cars tend to increase

According to statistics just announced by the Vietnam Automobile Manufacturers Association (VAMA), last December, the Vietnamese automobile market had a breakthrough with an increase of 30 to 32% compared to the whole of November and reached 13,205 vehicles compared to the same period in 2012. Also in last December, 19 members of VAMA sold 11,631 vehicles, an increase of 34% compared to the same period, of which Toyota Vietnam (TMV) alone sold 3,996 vehicles, an increase of 36.5% and the whole year of 2013 reached 96,692 vehicles, an increase of 20% compared to 2012.

However, 2013 witnessed the outstanding sales of completely built-up (CBU) imported cars with an increase of 23% while domestically assembled cars (CKD) increased by 18%.

In December alone, CKD vehicle sales reached 10,317 vehicles, up 24% compared to the previous month, while the number of CBU vehicles reached 2,888 vehicles, up 57% compared to the previous month. Thus, the number of CBU vehicles is still relatively low, but looking at the above figures, it is impossible not to be surprised at the growth rate and the increasing trend higher than CKD vehicles; even though on January 1, 2014, we just started applying the import tax rate at 50% of ASEAN according to the committed roadmap.

In the coming time, continuing the roadmap to join AFTA, the import tax rate for complete cars from ASEAN to Vietnam in 2015 will be 35%, in 2016 it will be 20%, in 2017 it will be 10% and in 2018 it will be 0%.

In the past year, also because of “concern” for the Vietnamese automobile industry to develop on schedule, the Ministry of Industry and Trade discussed with automobile manufacturers with the desire to build another tax reduction roadmap. Accordingly, it proposed that the Ministry of Finance “keep the pace” until 2017, specifically reducing to 50% in 2014, 50% in 2015, 40% in 2016, 30% in 2017 and 0% in 2018.

Since January 1, 2014, we have started to apply a 50% import tax on CBU vehicles from the ASEAN region to Vietnam and the prices of many imported car models will decrease, possibly equaling the prices of CKD vehicles. Thus, domestically assembled car models with low output and high costs will have difficulty competing with corresponding imported car models. In addition, CKD car models with large output will also be under pressure to compete in terms of price and quality, requiring assembly enterprises to find ways to reduce costs and improve product quality if they do not want to "close" the assembly production line soon.

Waiting for tax and fee reduction…

In 2013, the authorities introduced a series of policies to adjust fees and charges with the hope of stimulating the automobile market. Last year, the Ministry of Industry and Trade also developed a series of preferential policies, especially regarding tax rates for this specific industry. Accordingly, the Ministry of Industry and Trade proposed a 30% reduction in special consumption tax and 50% in registration fees for vehicles with cylinder capacity under 2.0L, or a 50% reduction in special consumption tax and registration fees for vehicles under 2.0L; a 70% reduction in special consumption tax and registration fees for strategic vehicles. In addition, it proposed to apply a 0% import tax rate or a floor rate for components that cannot be produced domestically, and at the same time proposed to keep the high import tax rate for CBU vehicles until 2018 to reduce it to 0%. However, the final "final" figure still has to wait for the decision at the next session when the National Assembly discusses amending the Law on Special Consumption Tax.

According to Mr. Jesus Metolo Arias - General Director of Ford Vietnam, Chairman of VAMA, currently the cost of car production in Vietnam is about 20 to 25% higher than other countries in the region - "How can we reduce this difference?" - Mr. Jesus wondered.

In addition, regarding the AFTA tax reduction roadmap, which currently only has a roadmap until 2014, the VAMA Chairman hopes that Vietnam will have support policies and tax policies that are low or equal to those of countries in the region.

According to current regulations on general taxes and fees, all are subject to value added tax, except for cars which are subject to special fees. From import, production, registration, and circulation, there are up to eight types of taxes and fees. Thus, taxes will affect the price of the car and the larger the capacity and the smaller the quantity, the higher the tax.

Regarding this issue, Ms. Nguyen Thi Cuc - President of the Vietnam Tax Consulting Association said that automobiles are in the group of goods that are not encouraged for consumption, so the application of special consumption tax is only historical in nature, specifically at present, Vietnam's traffic infrastructure is still limited, people's living standards are not high, so automobiles are not in the encouraged group, but there will be changes in the future.

As for domestically manufactured and assembled cars, they are not much affected by import tax, but are still subject to special consumption tax and are classified according to the actual number of seats and cylinder capacity according to the provisions of the Law on Special Consumption Tax - Ms. Cuc said.

When joining the World Trade Organization (WTO), Vietnam committed to a roadmap of non-discrimination between domestically produced goods and imported goods, so large-scale protection of domestic manufacturing enterprises is impossible. For automobiles, the tax rate under the WTO commitment will be gradually reduced to 70%, 52% and 47% over a period of seven to 12 years, and the State has proactively managed within the scope allowed by the commitment.

Cars with the “Made in Vietnam” label have only about four years left to enjoy the incentives. And from 2018, when import taxes from ASEAN countries are removed, by then the prices of imported cars will decrease and compete with domestically assembled cars...

Without incentives, everything will be a “level playing field”, gains and losses will depend on the capacity and “maturity” of the manufacturing and assembling enterprises. Currently, domestic automobile manufacturing and assembling enterprises are also planning, accordingly, the main direction is to focus on manufacturing and assembling car models with large output and high competitive advantages.

According to baonhandan