0% tax and the paradox of ASEAN car prices

Since passing the "threshold" of Decree 116, the number of cars imported to Vietnam from the ASEAN bloc has increased sharply. However, the prices of these cars have not only not decreased, but with some models, customers have to accept paying more to own them.

Looking back at the first months of 2018, the promulgation of Decree 116 has tightened standards for imported vehicles such as origin, model, emission levels, traffic safety...

Since the beginning of the year, more than 32,000 cars have been imported to Vietnam.

These strict regulations, along with Circular 03 issued by the Ministry of Transport, have almost closed the door for companies that simply import cars. As a result, the number of imported cars during this time has always been in a state of trickle.

Entering June, the number of imported cars continued to increase sharply. Notably, most of these cars enjoyed preferential tax under the ASEAN Trade in Goods Agreement (ATIGA).

Specifically, in just one week, from September 28 to October 4, 2018, the General Department of Customs recorded that the number of cars registered for import procedures reached 3,465 units, including 2,122 units originating from Thailand, Indonesia with 952 units, Mexico with 241 units, and China with 111 units.

Since the beginning of the year, more than 32,000 cars have been imported to Vietnam. Of these, about 90% are imported from the ASEAN market and enjoy a 0% tax rate.

Taxes have been reduced from 30% to 0%, cars are flooding in but car prices on the market have not decreased, many customers even have to pay more if they want to receive their cars early.

According to many experts, although the imported car market has been opened, the number of imported cars still cannot meet the demand for buying cars. This is the number of customers who intended to buy cars from the end of 2017 but held back until 2018 to wait for buying cheap cars.

Besides, it cannot be ruled out that car manufacturers are doing well with domestically produced cars due to the preferential import tax on components from Decree 125, so they are not in a hurry to launch imported cars, leading to a shortage of imported cars despite a large number of imported cars.

In the last 3 months of 2018, the shortage of supply in the Vietnamese automobile market is expected to continue to improve. However, it is difficult to be sure whether retail prices will decrease or not.

So we don't know when the dream of cheap cars for Vietnamese people will come true, but we do know that in the past 9 months, the Ho Chi Minh City Tax Department has reduced 5,700 billion VND in tax from imported cars with less than 9 seats compared to the same period last year.