Vietnamese consumers expect that as integration deepens, the import tax on completely built-up cars from the ASEAN market in 2016 will decrease to 40% compared to 50% in 2015, and car prices will decrease.

Illustration photo.

However, since the beginning of 2016, imported car prices have not decreased but increased from several tens of millions to several billion VND compared to before.

Tax reduction according to schedule but price increase

After several days of research at several car dealerships in Hanoi, Mr. Pham Van Tuan, Dong Da District, Hanoi) said he had plans to change his SantaFe to a Mercedes E400. Before going on a business trip, he had seen the car, but because he was busy with work, he did not sign a deposit contract to keep the car. After two weeks, the car price had increased to 80 million VND with the new price of 2.878 billion VND.

Meanwhile, Ms. Tran Hang in Ha Nam said: "For a long time, I thought that since Vietnam joined and implemented many trade agreements, many types of goods would be discounted, like in 2016, when the import tax on cars was reduced by 10%, car prices would decrease accordingly. But when I went to the dealer, I was shocked to find that car prices were not reduced according to the schedule but had increased compared to last year."

In fact, this car price increase has been applied by some businesses since the beginning of 2016. Pioneering in this is Mercedes-Benz Vietnam applying a new price list with the lowest increase of 20 million VND for the CLA and the highest of 1.8 billion VND for the G65 AMG (16.499 billion VND).

While Euro Auto, the BMW importer and distributor in Vietnam, is still considering increasing car prices, in the market, the BMW Series 6 Gran Coupé increased by 65 million VND to 4.29 billion VND; BMW 118i increased by 80 million VND to 1.379 billion VND; BMW X6 xDrive30d increased by 499 million VND to 3.888 billion VND...

While the luxury car segment has increased from several tens of millions to nearly several billion VND, in the popular car segment, some manufacturers are still considering to avoid a decrease in sales during Tet - this shopping month.

Hyundai Thanh Cong - an assembler and importer of popular car models from Korea and India, said that to support customers, the company has been trying to maintain the old prices for at least the next few months. However, in the long term, it will consider increasing prices to suit the actual situation. Some other companies such as Truong Hai and Toyota, although not increasing prices immediately, are also considering adjusting car prices in the near future.

For popular car lines such as Hyundai, Kia... have made efforts to keep the old price to support customers, at the end of the year some dealers even offer incentives with prices lower than the listed price of the supplier. Ms. My Hanh in Chuong My excitedly shared that she and her husband have just bought a satisfactory car within their budget - Hyundai i20 multi-purpose sports car imported completely from India with a price of over 600 million VND, more than ten million cheaper than the price of 619 million VND when this car model was launched in July 2015...

Car prices are unlikely to decrease.

According to Circular 165/2014/TT-BTC of the Ministry of Finance on promulgating Vietnam's special preferential import tariff to implement the ASEAN Trade in Goods Agreement for the period 2015-2018, the import tax rate for completely built-up cars from the ASEAN region will decrease from 50% in 2015 to 40% from January 1; to 30% from January 1, 2017 and to 0% on January 1, 2018, accordingly, car prices will decrease significantly.

In addition, in Circular No. 182/2015/TT-BTC of the Ministry of Finance promulgating the preferential export tax and import tax schedule according to the list of taxable goods, from January 1, 8 automobile tax lines will be reduced by 2-4%, according to the WTO commitment roadmap...

However, according to Decree 108/2015/ND-CP, from January 1, the selling price of imported cars with less than 24 seats by the importer must not be lower than 105% of the cost price of the imported car. The cost price of the imported car includes the price calculated for import tax plus import tax (if any) plus special consumption tax at the import stage. In case it is lower than this level, the tax price will be determined by the tax authority.

Thus, the special consumption tax price will add a part of the business's profit, transportation costs and other related costs, making the car price higher.

According to the calculation of enterprises, with the special consumption tax calculation method of Decree 108/2015/ND-CP, many types of vehicles will have their tax increased from 5 to 10% compared to before, causing the price of the vehicle to increase accordingly. Along with that, the State Bank applied a new exchange rate mechanism between the Vietnamese Dong and the USD, making it very difficult for enterprises to orient their plans.

Accordingly, when the exchange rate fluctuates, the cost incurred by the business must increase and then be included in the cost of products sold to ensure the business makes a profit. Thus, with only two factors, tax and exchange rate, the car price in 2016 is unlikely to decrease.

Along with that, facing traffic congestion in two big cities, Hanoi and Ho Chi Minh City, these cities are having a headache with plans to limit personal vehicles, especially cars.

At the online meeting between the Government and localities at the end of 2015, the new Chairman of the Hanoi People's Committee, Nguyen Duc Chung, proposed to the Government to direct the central ministries and branches to coordinate with Hanoi to develop plans and roadmaps to limit personal vehicles in order to reduce traffic congestion. This restriction may result in local authorities having policies on taxes and fees to meet the practical needs of each locality, making the cost of a car higher.

Thus, the roadmap to reduce import tax has been available, but with the fluctuations in special consumption tax and the policy of limiting personal vehicles, the price of imported cars to consumers has not only decreased but also increased compared to before. The dream of buying cheap cars according to the integration roadmap for domestic consumers has not been as expected.

Even Mr. Pham Van Tuan and many others believe that by the beginning of 2018, the car import tax will be cut to 0%, but many consumers believe that policymakers may still consider this a luxury item that does not encourage consumption like in recent years and there is a possibility of repeating the story of reducing this - reducing according to the roadmap, but increasing that - increasing other taxes and fees to limit personal vehicles.
This is also a story that businesses, experts, and policymakers discuss a lot at auto and personal vehicle exhibition conferences because cars are still considered luxury goods, so each car has to bear more than 10 types of taxes and fees such as value added tax, special consumption tax, registration tax, and many other fees that increase car prices to limit consumption.

According to Economics and Urban