Auto market still in a spin

Tax and fee policies were the largest bottleneck to local auto market growth in the first half of 2012, as heard at the ‘Real state and solutions to remove difficulties and develop auto market’ in Hanoi last week on the sidelines of Vietnam Auto Expo 2012.

Former deputy minister of Industry and Trade (MoIT) and chairman of Vietnam Society of Automobile Engineers Do Huu Hao said the auto market was hurt by tax policies, particularly the Ministry of Transport’s (MoT) personal vehicle usage limitation fee collection proposal.

According to Vietnam Automobile Manufacturers Association (VAMA) statistics, just 6,870 cars were sold in May, sinking 32 per cent on-year. A VAMA representative said plummeting sales in the first five months came from policies, not economic woes.  

Accordingly, from early 2012 cars’ ownership fees hiked from 12 to 20 per cent in Hanoi and from 10 to 15 per cent in Ho Chi Minh City. Besides, plate registration fees in Hanoi rose to VND 20 million ($950) per unit. Later, the MoT voiced its proposal to impose fees on limiting personal vehicle usage which scared away many potential car buyers.  

MoIT Heavy Industries Department deputy head Ngo Van Tru assumed auto market transactions would be frozen due to new fee proposals.

The auto industry has made remarkable contributions to state coffers in the past years. Hence, sinking consumption of 21,331 car units on-year by VAMA’s 18 member units in the first four months of 2012 created a dent of $290 million (VND6 trillion) to state coffers.

Since production output is one of important criteria reflecting auto market development limiting personal vehicles via fee and tax policies would deter the car industry from reaching its projection as well as hiking localisation rate.

To rescue auto market growth, Hao suggested the state present clear and stable tax policies in the next years as from 2018 imported cars from ASEAN countries into Vietnam will be tax free.

“The auto market will quickly resume sales figures if the excise tax levied on cars generally was pulled down to below 20 per cent and luxurious cars suffered from high or even 100 per cent tax rate,” said Hao.

“By 2012 car manufacturers will all leave Vietnam and each year the country will need to spend $10-12 billion on importing cars to catch up local demands unless car industry’s stimulus measures were put into place,” Hao added.

Car manufacturer representatives reportedly proposed the government cancel personal vehicle usage limitation fee collection plan and reduce ownership fees to 5 per cent to be applied equally across the country to underpin car market growth.