0% tax, Vietnamese people dream of cheap European cars
Automobiles imported from Europe into our country will be completely exempt from import tax.
Consumers are expecting the price of imported cars from Europe to decrease rapidly in the near future. According to the roadmap of the Vietnam (VN) - EU Free Trade Agreement (EVFTA), the tax rate for cars imported from Europe to Vietnam will be 0% after 7-9 years from the date the agreement officially takes effect. The tax rate for car parts will also be reduced to 0% after seven years, while the current tax rate is over 32%.
Currently, the tax rate on imported cars from Europe is up to 70%-78% depending on the type. Trucks under 5 tons, including pickup trucks, are subject to an import tax of 65%. When the EVFTA takes effect, expected from 2019, the tax reduction will also take effect immediately. According to calculations, the average tax reduction per year will be about 7%.
No immediate reduction
Currently, cars imported from Europe to Vietnam are mainly luxury cars such as Mercedes-Benz, Audi, BMW, Land Rover or super luxury cars such as Rolls-Royce, Bentley... These car lines are subject to import tax rates of 70 - 78% depending on the type.Mr. Nguyen Duy Hau, owner of a dealership selling imported cars from Europe and the US, calculated: If the import tax is 0%, in theory, car prices will decrease the most, especially for cars imported from countries with high taxes like Europe.
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| Consumers are expecting the prices of luxury and super luxury cars to decrease when the tax is reduced to 0%. |
For example, the BMW 330i models that have just been launched in the European market have a selling price of about 33,600 euros. When the import tax is reduced from 78% to 0%, the price of this car will not have to bear an additional tax of 26,000 USD, equivalent to nearly 700 million VND. This means that when exempted from tax, the price of the above car will decrease by over 700 million VND per car.
Similarly, for more expensive models such as the Audi Q8 (engine capacity over 3.0 liters), the current price is around 89,000 euros. This model is currently subject to an import tax of around 65,800 euros, equivalent to over 1.7 billion VND. If the import tax is exempted, the price of the above model sold in Vietnam will decrease by billions of VND, because when the price of imported cars decreases, the special consumption tax, registration fee, etc. will also decrease.
A super luxury car with a declared price of 300,000 USD, 6.0 liter cylinder capacity, currently imported to Vietnam is subject to 70% import tax, 150% special consumption tax and 10% value added tax... But when the tax is reduced to 0%, the price of this car will decrease by about 600,000 USD.
However, according to Mr. Hau, import tax rates under the FTA are reduced over a long period of time, so car prices do not decrease all at once but decrease gradually, meaning a little each year.
Ms. Nguyen Thi Hien (owner of Hien Toyota dealership on Pham Hung Street, Binh Chanh District, Ho Chi Minh City) also said that European cars imported to Vietnam are mainly brands such as Audi, BMW, Mercedes-Benz... Most of the companies penetrate the Vietnamese market through import, not production or assembly in our country.
These imported cars have always been priced sky-high, 2-3 times higher than other countries in the region due to high taxes and fees. Therefore, it is hoped that when the tax is exempted, the car prices will decrease, but it is difficult to reduce deeply and immediately.
Besides imported cars from Europe, domestically assembled cars currently have import tax on components of 20%-32%. Therefore, when the tax is reduced to 0%, the price of cars will also decrease.
Don't expect too much
Many opinions agree: In theory, many luxury and super luxury car models will have their prices reduced from hundreds of millions to billions of dong. However, whether luxury car prices will decrease or not and how much will depend on many factors such as policy barriers, technical barriers... to protect the domestic automobile manufacturing and assembly industry.
Mr. Thanh Duy (District 11, Ho Chi Minh City) said that Vietnamese consumers had waited and then were disappointed when the import tax on cars from the ASEAN region was reduced to 0% but the car prices still did not decrease. "If the import tax is reduced but the policy changes constantly, then the special consumption tax and registration fee are increased... then the buyers will not benefit" - Mr. Duy said.Mr. Tran Tan Trung, representative of the unit importing and distributing the luxury Audi car line in Vietnam, General Director of Lien A International Joint Stock Company, said that the roadmap to reduce tax to 0% is long, so it is not possible to accurately assess the specific impact on imported car prices.
However, experience shows that since the beginning of 2018, according to the commitment of the ASEAN free trade area, the import tax on cars has been reduced to 0% but the price of cars has not decreased as expected. Even the difficulty of importing with a small number of cars has caused some car models to increase in price, become scarce, and become more difficult to buy.
“Thus, reducing taxes on imported cars from Europe needs to be accompanied by open and reasonable import policies, so that people can buy cars at lower prices than they do now. If barriers are created to prevent imported cars from Europe, don’t expect car prices to decrease too much,” Mr. Trung shared.
Sharing the same view, auto expert Nguyen Minh Dong also assessed that the biggest barrier to reducing the price of imported cars from Europe is not the tax reduction roadmap but lies in adjusting Vietnam's tax and import policies. A typical example is the story of Decree 116/2017 creating administrative barriers that make it difficult for imported car companies.
“Administrative policies make imported car companies spend more time, more money, and increase selling prices, affecting consumers' wallets,” said Mr. Dong.
