Ministry of Finance proposes registration fee cut for electric cars

VinFast is the only manufacturer of electric cars in Vietnam

This is one of the new contents of the ministry's (MoF) draft decree amending and supplying Decree No.140/2016/ND-CP on registration fees. The much-reduced registration fee is expected to be applicable for five years from the date of the decree taking effect.

This policy encourages businesses and consumers to manufacture and use electric cars, in line with the Law on Environmental Protection and the directions of Deputy Prime Minister Le Minh Khai.

In the current Decree No.140, the first-time registration fee for passenger vehicles with nine seats or less is 10-15 per cent of the value of the vehicle (set by the relevant local governments). The draft would reduce this to 5-7.1 per cent for electric cars while subsequent registrations will be 2 per cent, the same for comparable petrol cars.

For example, for a VND600 million($26,090) electric car, buyers now need to pay VND60-90 million ($2,610-3,910) for first-time registration, however, the fee would be dropped to VND30-45 million ($1,300-1,960) by the draft.

According to the Law on State Budget, the registration fee goes into the budget of the local authorities, with cars accounting for a growing proportion of this revenue (69 per cent in 2017, 70 per cent in 2018, 74.6 per cent in 2019, and 79 per cent in 2020).

In Vietnam, only VinFast manufactures electric cars with an annual capacity of 250,000 vehicles. However, as of the end of 2020, only 1,000 electric cars were registered in the country, making up about 0.16 per cent of the market.

One of the factors hampering the development of electric cars in Vietnam is the lack of transport infrastructure like charging stations, and land for charging stations. Thereby, the MoF assessed that in the near future, electric cars will only develop slowly and in big cities, which means the reduction in budgetary revenues from registration fees will not be significant.

Previously, in mid-May, Vingroup proposed the government agencies to pilot special consumption tax incentives and registration fees for five years with electric cars.

Vingroup CEO Nguyen Viet Quang said that, following international practices, it is necessary to build synchronous policies to encourage manufacturers, distributors, and consumers, as well as build an ecosystem for electric vehicles.

In March, VinFast released the first model of its VF e34 electric car that will be priced at VND590 million ($25,650) and is expected to begin handover to consumers in November.

Globally, electric vehicles are becoming very trendy, accounting for 65 per cent of newly-registered cars in 2020. In many countries, including Egypt, Hungary, the Netherlands, and Spain, first-time registration fees are waived while they are reduced in China, France, and Finland.