Extra taxes keeps buyers from cheaper cars

Local customers look at a Ford car model displayed at the VMS 2016 in Ha Noi. - VNS Photos Doan Tung

While tariffs fell following the birth of the ASEAN Economic Community this year, the Government added a duty of US$1,000-$2,000 on imported cars in early September.

Buyers and car traders were waiting for amendments to the Law on Special Consumption Tax in July that reduced the tax on cars with engines of less than 1,500cc from 45 per cent to 40 per cent.

But the tax on cars with 1,500-2,000cc engines remains at 40-45 per cent, while the rate for 2,500cc-3,000cc vehicles rose from 50 to 55 per cent.

Popular small cars such as the Hyundai i10 and i20, Kia Morning, Toyota Vios, Toyota Yaris, Ford Fiesta, and Mazda 2 cost around VND358-670million ($15,900-29,910).

But their prices have all risen. Unfortunately, beginning in early September 2016, import tariffs on imported cars with engines below 1,500cc increased $1,000 against July 1, 2016. For instance, an import tariff levied on a Kia Morning with a 1,000cc engine has risen from $4,700 to $5,600. The Kia Rio Hatback with a 1,400cc engine is now levied at $7,500, instead of $6,500. The Hyundai Accent with a 1,400cc engine has been lifted to $6,700 from $5,700. For vehicles with engines ranging from 2,000cc, such as the Kia Optima witha 2,400cc engine, they are being taxed at $15,600, instead of $13,000, and the Kia Sportage LX with a 2,000cc engine is levied at $13,000, instead of $11,000.

The duty is also levied on second-hand cars, at the rate of $5,000 on those with engines below 1,000cc and $10,000 on those with 1,000-1,500cc.

The retail prices of luxury cars and those with high cylinder capacity have gone up dramatically due to the new tariffs and duty.

Customers look for a suitable car at a showroom in Ha Noi. - VNS Photo

Stimulating car sales

Quang Tuan, a Ha Noi resident, said he was saving to buy a cheaper small car after July 1, but with the extra duty he has had to temporarily shelve his plan.

Van Nam, an automobile trader in Ha Noi's outlying Gia Lam District, said sales of small cars has been slowing down.

Ford, Suzuki, Mazda, and other dealers also confirmed that there was no sudden change in prices after the law came into effect.

A car dealer of Chevrolet in Ha Noi said that sale volumes over the months were not influenced by the special consumption tax. Because of this General Motors Vietnam has launched its monthly promotional campain by asking its sale agents to strongly cut prices.

Manh Tu, a sale representative of a Toyota car dealership in Ha Noi, said to stimulate purchasing power, his car dealership has offered many promotions by reducing prices between VND20 to VND30 million for small vehicles such as Vios or Yaris.

"The price of a locally assembled Ford Fiesta with a 1,500cc engineis being offered at a promotional discount ranging from VND40 million to VND44 million per unit. While, cars with bigger engines like the Ford Ranger from 2,200cc to 3,200cc are being offered at a promotional discount of VND10 to VND30 million, with an average sales of 10 to 15 units per month per sales agent," Hong Minh, a sales representative of Ford Thang Long told Viet Nam News.

An auto expert said that in May and June, many car dealers have stimulated purchasing power by slashing selling prices to be equivalent to the tax reduction of the special consumption tax on July 1, 2016.

Reffering to the policy for special consumption rates and car prices in Viet Nam in the future, President of the Vietnam Automobile Manufacturers Association (VAMA) Yoshihisa Maruta told a press conference recently held to celebrate the association's 15thanniversary of its establishment in Ha Noi that each car in Viet Nam has been bearing various taxes and fees including import tax, luxury tax rates, value-added tax and registration fees, so it's difficult to foretell the time when car prices would be truly reduced.

However, he said VAMA and other auto businesses will make their best efforts to give clients a suitable price.

VAMA will continue to propose to the Government to ensure the rights and interests of auto makers, both locally-assembled products and imported, as well as of buyers nationwide.

Arrears on luxury cars

Nguyen Van Phung, a representative of the General Department of Taxation said that domestic auto importers raced against time to import cars before June 30 to avoid higher special consumption taxes. However, if the imported cars were sold after July 1, they will automatically collect arrears.

Tax rates on luxury cars with engines ranging between 2,500cc-3,000cc will see a rise from 50 to 55 per cent.

For those with engine displacements between 3,000cc-4,000cc, the rise will be an even sharper 60 to 90 per cent, and cars with engines between 5,000cc –6,000cc will see a rise from 130 to 150 per cent.