Cheap cars flood in, domestic cars reduce prices

Despite the downward trend in domestic car prices, the large number of completely built-up cars imported from ASEAN countries and some other markets continues to increase sharply to Vietnam, typically cars from Indonesia, Thailand and India.

Cars are imported into Vietnam in large numbers.

According to the General Department of Customs (Ministry of Finance): In February 2017, of the 15,200 completely built-up cars imported to Vietnam, cars from Thailand, Indonesia and India accounted for 65%. After 2 months of 2017, cars from the above three markets also accounted for nearly 70% of the total number of completely built-up cars imported to Vietnam (mainly passenger cars with 9 seats or less).

Among the three markets with the most imported cars in the first two months of the year, the leaders are still cars from Thailand (5,700 cars), Indonesia (3,100 cars) and India (1,700 cars). In February alone, more than 718 cars were imported from India, although it decreased by more than 300 cars compared to January, but increased by more than 570 cars compared to January last year. In the first two months of 2017, the number of Indian cars imported into Vietnam reached over 1,720 cars, an increase of more than 1,500 cars compared to the same period in 2016, after 1 year the number of cars increased more than 9 times.

Cars imported from Indonesia to Vietnam in February were estimated at more than 1,280 units, down about 600 units compared to the previous month, but up more than 630 units compared to the same period in 2016. In the first two months of the year, there were about 3,100 Indonesian cars imported to Vietnam, up more than 2,400 units compared to the same period in 2016, a growth rate more than 4 times after 1 year.

Thai cars imported to Vietnam in February reached over 3,100 units, an increase of over 500 units compared to January and over 1,000 units compared to February 2016. In the first two months of this year, there were about 5,700 Thai cars imported to Vietnam, an increase of over 970 units, a growth rate 1.2 times after 1 year.

Regarding the markets with a decrease in imported cars in the first two months of 2017 compared to the same period last year, cars from Germany decreased by more than 90 cars, Japanese cars decreased by more than 230 cars, and the biggest decrease was Chinese cars by more than 540 cars.

According to the preliminary assessment of the General Department of Customs, the increase or decrease in the import of the above types of vehicles depends largely on the market and the preferences of Vietnamese people for buying and using cars. However, according to the explanation of the General Department of Customs, this is due to the impact of tax policy, specifically from January, the import tax on cars from ASEAN has been reduced to only 30% instead of 40% as before.

Cars from the German, French, Japanese, Russian, and Chinese markets are still subject to import taxes of 45-75%. Although the Vietnam-EU bilateral Free Trade Agreement has provisions to eliminate import taxes for cars from the UK, France, Germany, etc., signed in 2015, according to the commitment, Vietnam will have to remove import tariffs on cars from EU countries after 10 years (2025). Import taxes on cars from EU countries remain the same as they are now.

In addition, the sharp increase in Thai, Indonesian, Indian and Korean cars entering Vietnam is explained by the impact of the adjustment of Special Consumption Tax (SCT), which increases sharply for cars with cylinder capacity of 2.5L or more and sharply decreases from 5 - 10% tax rate each year for cars with cylinder capacity of 2.0L or less. This is considered an advantage to promote the number of popular cars from Thailand, India and Indonesia entering Vietnam.

Regarding price, according to customs declaration price data (tax declared by the importer, not including import tax, special consumption tax, value added tax), import value/total imported volume of complete cars provided by the General Department of Customs, cars from India, Indonesia and Thailand continue to have the cheapest prices on the market today.

Specifically, the average price of imported cars from India in the past 2 months has fluctuated from only 88 million VND/car, down more than 2 million VND compared to the same period last year. This is a super cheap car price, the cheapest in the current imported and domestically assembled car market.

Indonesian and Thai cars, in 2 months, the average price is from 250 - 430 million VND/car respectively, the imported car price is currently the 2nd and 3rd cheapest in the market. Next is the price of Korean cars, the average is about 300 million VND/car, the price is much cheaper than Japanese and American cars...

The highest average price of imported cars belongs to cars originating from France, Germany, Russia, and the US. Specifically, the average price of French cars is 1.7 billion VND/car, Russian cars are also about 1 billion VND, German cars are 1.3 billion VND and American cars are more than 770 million VND/car.

Notably, among the countries with expensive imported cars in the first two months of the year, German cars have the fastest and strongest price increase. If compared to the price of cars imported from this country to Vietnam in the first two months of 2016, the average price was only 690 million VND/car, currently the average price of German cars is 1.3 billion VND/car.

Returning to the market of cheap imported cars from ASEAN countries, many hypotheses and scenarios for the 2017 car market have been put forward by experts and car dealers: The trend of reducing imported car prices will prevail, pushing domestically assembled cars into price competition until the end of the year. In 2018, when import taxes on cars from countries such as Thailand, Indonesia, and Malaysia are removed when entering Vietnam (on the condition that these countries ensure a minimum localization rate of 40% of the car), it is likely that the price level of new cars in the country will be established.

This will create a trend of price competition, forcing domestic car assembly joint ventures to lower their prices to be competitive enough domestically, which will benefit the market and consumers.

According to TPO