Why are car prices in Vietnam so expensive?

It is true that car prices in Vietnam are currently high compared to other countries, including developing countries as well as neighboring countries, Deputy Minister of Industry and Trade Do Thang Hai admitted at the Government press conference on the afternoon of December 2.

The reporter's question is, currently many domestic automobile manufacturers are complaining about the difficulty of tax and fee policies for completely built-up cars and domestically produced components, making it difficult to compete and increase the localization rate. Some businesses said they lost hundreds of millions of VND for each car sold. Taxes and fees make car prices very high compared to people's income.

Deputy Minister of Industry and Trade Do Thang Hai answers the press at the Government press conference on the afternoon of December 2 - Photo: QP

The question for the leaders of the Ministry of Industry and Trade is when will there be a policy to develop the domestic automobile industry in a practical way, avoiding the mistakes of previous enterprises. When will Vietnamese consumers be able to buy cheap cars?

Responding, Deputy Minister of Industry and Trade Do Thang Hai affirmed that for any country, especially countries with 100 million people like Vietnam, the automobile industry is extremely important.

Admitting that car prices in Vietnam are high, Mr. Hai cited reasons such as taxes and fees currently accounting for a relatively large portion of the cost, and the cost of manufacturing and assembling cars domestically is quite high.

According to the leader of the Ministry of Industry and Trade, Vietnam's market capacity is still small because Vietnam's automobile industry does not have enough market conditions and other factors to develop like other countries in the world as well as in the region, while also having to face fierce competition from other rivals such as China, Korea, India and even ASEAN countries.

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On the other hand, Vietnam is behind and develops later than other countries, including countries in the region, let alone advanced countries in the world, while it has deeply integrated into the world economy and signed many free trade agreements. Therefore, the room for policy intervention in industrial development, including the automobile industry, is not large, because it must comply with international commitments, which means we cannot do whatever we want, Mr. Hai emphasized.

Another reason, according to the Deputy Minister, is that Vietnam does not have many regional and world-class enterprises in the automobile industry. "We do not have locomotives, so it is difficult to pull the train cars, which are our supporting industrial production. This is a reality," said Mr. Hai.

Next, Mr. Hai mentioned business practices in countries showing that FDI enterprises often use component manufacturing enterprises in their home country, thus, there is a lack of integration and connection between the FDI and domestic sectors.

Furthermore, Vietnam is lacking basic materials for car production and manufacturing such as plastic, rubber... so it has to import them, at high cost.

Regarding upcoming solutions, Mr. Hai said the Government will protect and develop the domestic automobile market with technical barriers, ensuring compliance with international commitments.

There is also a policy to stimulate car consumption through reasonable planning of the transport infrastructure system and encouraging credit for car consumption.

Deputy Minister Hai also said that he has grasped the needs and recommendations of businesses operating in the Vietnamese automobile industry to propose amendments and supplements to a number of regulations related to taxes and fees to enhance competitiveness and narrow the gap in production costs between domestic and imported cars.

Mr. Hai also affirmed that there will be mechanisms to attract investment policies from multinational corporations in large-scale projects in Vietnam, but focusing on brands and car lines that are not yet available in the ASEAN region to create conditions for domestic enterprises to participate deeply in the multinational automobile production chain and target export markets in the region.