Gov’t regulation offers golden opportunity for local auto production

Under the newly issued Decree 125, the import tariff on used passenger cars with less than 16 seats has been raised, while the tariff on used cars with 16 seats and more and used trucks remains unchanged.

Passenger cars with nine and fewer seats and capacity of no more than 1000cc will bear a fixed tax rate of US$10,000 per car.

The passenger cars with cylinder capacity of 1000cc and more and with 10-15 seats will bear mixed tariffs, to be calculated as follows:

For 1.5L to less than 2.5L cars, the import tax will be equal to the taxable price x 150-200% (tax rate) + US$10,000.

For 2.5L and bigger cars, the import tax will be equal to the taxable price x 150-200% (tax rate) + US$15,000.

Analysts estimate that the new way of taxation will increase the selling price of used cars by hundreds of millions of dong. In some cases, used car prices will be even higher than brand-new cars of the same kinds because of higher tax.

According to Duy Minh, the owner of a car sales agent in HCM City said a used 1.0L car imported from the Republic of Korea now has taxable price of US$5,000 and bears a fixed tax rate of US$5,000. This means that the cost price of the car is US$10,000.

However, with the new tax rate, the cost price would be US$15,000. And counting other expenses, the selling price of the used car would be US$23,000, or VND600 million. Meanwhile, a brand-new car of the same kind is sold at VND500 million.

According to Nguyen Thi Thanh Hang, deputy director of the MOF’s (Ministry of Finance) Tax Policy, the new policy aims to ensure benefits to the state, enterprises and consumers.

MOF aims to encourage the development of the automobile industry and support industries, help the domestic automobile market grow in a stable way and maintain the domestic automobile manufacturers’ competitiveness in prices.

Prior to that, the government released Decree 116, setting up strict requirements on manufacturing, assembling, importing and maintenance services.

Analysts commented that the decrees released recently all show the government’s determination to protect domestic automobile production.

Meanwhile, Tran Ba Duong, chair of Truong Hai Automobile, said the Decree 116 aims to protect consumers rather than domestic manufacturing, especially in the context of poor transport infrastructure and high number of accidents.

“Fair treatment will be given to imports and domestically made products, i.e. imports will have to satisfy the same requirements set on domestically made products,” he explained.