Import tariff jump drives up automobile prices

September 09, 2003 | 18:04
Vietnam’s higher tariffs on auto part imports, up by 5 per cent from early last week, have forced local auto makers to raise prices. To spur automakers to make vehicle parts in Vietnam rather than import them, the government from September 1 raised tariffs on auto part imports from 20 to 25 per cent.
Toyota, the largest market share holder in the Vietnamese market, last week released a new price scheme for its models, up from 2.5- 3 per cent, while other foreign-invested assemblers are expected to follow suit. Ford said it would soon release a table of price increases.
Vidamco-GM executives said they had asked their parent company abroad whether prices should be raised. A sales executive said although they would not receive a response until early this week, he anticipated that Vidamco-GM would also raise prices.
Auto assemblers contacted by Vietnam Investment Review said the raised tariffs would have a great impact on sales.
A Ford spokesman said all auto assemblers were worried about future sales, estimating that auto prices would go up by an average 3-5 per cent.
Vidamco-GM sales manager Le Van Tan said he predicted auto industry sales would plunge 30-40 per cent over the rest of this year compared to last year.
As the new tariff’s enforcement date of September 1 loomed, customers rushed to buy cars to beat the tax hikes, leading to a sales boom in August.
Ford sold 478 vehicles in August, about 40 per cent higher than the average monthly sales across January-July. But, Vidamco-GM’s Tan said concerns over possible raised prices meant his company’s number of purchase orders dwindled last week – the first week of new-tariff enforcement – compared to previous months.
Vinastar (Misubishi) deputy sales manager Trinh Cong Tuynh said Vinastar would maintain its current prices until December.
“We have decided to maintain current prices to encourage purchases in the rest of the year. This, of course, means we have to bear a higher production cost,” Tuynh said.
Vietnam’s more open policy for the private sector, especially the introduction of the Enterprise Law in 2000 which creates thousands of new private domestic firms each year, and the annual high economic growth of around 7 per cent, have led to continued auto sale increases in the past three years.
Vietnam’s lawmakers approved a special consumption tax in late May that would raise the retail price of a standard five-seat car by more than 20 per cent in 2004 and 40 per cent in 2005.
Such moves to introduce higher tariffs aim to force the 11 auto assemblers, all foreign invested, to raise the local content of their products. The government requires auto makers have a 25 per cent local content by 2006.
Toyota has the highest local content, at about 13 per cent. The average figure for the whole industry is 8 per cent. Domestic auto sales by the 11 foreign-invested auto makers during the eight months of this year surged nearly 44.6 per cent year-on-year to 22,181 vehicles.

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