ASEAN cars reign in Vietnam market even before tax cut

The reality is that cars shipped from Thailand or Malaysia are widely available in Vietnam, and some local automakers have switched to importing most of their products in lieu of manufacturing or assembling their own vehicles.

“It’s a common mindset among Vietnamese consumers that imported cars are better than locally manufactured automobiles,” Nguyen Hoang Loc, a salesman at a Mitsubishi showroom in Ho Chi Minh City’s District 5, said.

The newly imported Mitsubishi cars on display at the showroom have won over many customers and orders have been flooding in, Loc revealed.

The Japanese carmaker currently has six of its brands available in Vietnam via Vinastar, which now has 18 dealerships countrywide.

Vinastar is a joint venture between Mitsubishi, a Vietnamese partner, and a Malaysian firm.

But it is only making and assembling two out of those six brands, while the remainder is imported from Thailand and Japan.

Nguyen Hoang Tuan, hailing from the southern province of Long An, bought a five-seat Attrage sedan for VND548 million (US$25,793) during the Vietnam Motor Show 2014 in Ho Chi Minh City late last month.

Tuan said the price is VND60 million ($2,824) lower than similar products two Japanese carmakers make and assemble in Vietnam.

“I also received gifts worth a total of VND35 million ($1,647), so the price is really reasonable,” he added.

At a ceremony to introduce three new brands Vinastar will import from Thailand and Japan last month, general director Kazuhiro Yamana said the company is not sure if there will be any policy changes toward the automobile industry from now to 2018.

That is why Vinastar switched to importing complete cars instead of parts to assemble in Vietnam, he added.

Vietnam is required to enact zero import duties on ‘sensitive commodities’ including steel, automobiles and parts by 2018, according to the ASEAN Trade in Goods Agreement (ATIGA).

The ATIGA, signed on February 26, 2009 during the 14th ASEAN Summit in Thailand, is intended to establish a single market and production base with free flow of goods by 2015 for the ASEAN Economic Community, according to the Vietnamese finance ministry’s website.

The trade pact took effect on May 17, 2010, under which Vietnam has to eliminate import duties in three tranches, by January 1, 2013, 2014 and 2015, according to the ASEAN.org website.

But flexible conditions for steel, automobiles and parts will be in place until 2018, the Vietnamese ministry said.

ASEAN is a ten-member bloc which includes such Southeast Asian countries as Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar and Vietnam.

Tax-cutting plan

The Vietnamese finance ministry has submitted its tax cutting plan for ASEAN-imported automobiles from now to the 2018 mark, a ministry official told Tuoi Tre (Youth) newspaper on Wednesday.

The import duty for cars from ASEAN countries was lowered from 60 percent in 2013 to 50 percent this year, and the rate will be maintained in 2015, according to the official.

The tax will be lowered to 40 percent in 2016, 30 percent in 2017 and 0 percent in 2018, he said.

The official admitted that opinions still vary among ministry officials about the tax cut plan. But the ministry is slated to announce the official plan next week, he added.

So will Vietnamese customers be able to pay less for a car in 2018?

Phan Duong Cuu Long, general director of Saigon Ford, said if the special consumption tax on imported cars remains unchanged at 45-60 percent in 2018, a Yaris car imported from Thailand, which currently costs $33,000 in Vietnam, will cost $22,000 in 2018, given the zero import duty.

As for other expenses such as registration fees (12 percent in Hanoi, and 10 percent in other provinces and cities), value-added tax and license plate charges, the rates in 2018 are unpredictable as they are not regulated by the ATIGA, Long added.