Car assemblers’ collision course with ruling

Decision 98 signed by Truong Chi Trung, vice minister of Finance, said that the import duty applied to second hand cars would be set at 150 per cent.
Meanwhile, import duty on new cars will be decreased by 10 per cent to 90 per cent, the decision stated.
Experts said that there would be breakthrough changes in the automobile industry when the decision is put into effect as in the past the import of second hand cars has been forbidden to protect local enterprises.
However, trading enterprises would only be able to import second hand cars after the Ministry of Trade adjusts import mechanisms on some commodities including second hand automobiles.
Pham Anh Tuan, an expert from the Vietnam Automobile Makers Association (VAMA) said: “With the introduction of second hand car imports in the coming time, several trading enterprises may find lots of profits from importing such automobiles.”
“It will be very difficult for the customs to identify whether price declarations of importers are honest,” he said, adding that in several countries, second hand cars were very cheap, sometimes only $1,000.
The government’s move, according to experts, is in response to the current high prices of locally assembled cars, which should be pressurised to reduce a price.
Recently, VAMA, on behalf of foreign invested automobile assemblers, announced that locally produced car prices will not be coming down.
The association said that the recent 10 per cent special consumption tax (SCT) increase on locally assembled cars to 50 per cent was the reason for the hike in car prices.
Tuan from VAMA said that it was expected the sales volume of cars from local assemblers would sharply reduce by around 10,000 to 32,000 units sold in 2005.
Do Huu Hao, vice minister of Industry, said that together with the increase of SCT, the reduction of import duty on new automobiles will cause more difficulties for automobile assemblers in the business years ahead.
The deputy general director of a foreign invested automobile assembler said that “the business strategy of some foreign invested automobile firms may change due to the government’s decision on import duty reduction.” He said that some foreign invested assemblers would turn their business to specialising in importing cars to sell on the domestic market.
Meanwhile, consumers who want to buy cars are waiting for the reduction of car prices right after the decision comes into effect.
The MoF’s plan is that the duty reduction on new automobiles will be brought down to 20 per cent by 2010 as required by ASEAN countries to open Vietnam’s automobile market.
Hao said that it was only automobile enterprises that had a high local content in their locally assembled cars that could survive the stiff competition with imported cars.


No. 742/January 2-8, 2006