VietNamNet Bridge - Automobile manufacturers, authorized
distribution companies and private car dealers have always been suffering a
constant anxiety about the changeable policies. New decisions would be released
by government agencies at any times which may destroy their business plans.
VietNamNet here reviews the big
changes in the policies relating to the automobile industry that occurred in
the last nine years.
2003: car part import tariff up
Since January 1, 2003, the car
part imports for making less-than-10-seat products under the mode of CKD 1, CKD
2 (complete knock down) and IKD (incomplete knock down) began bearing higher
import tariffs.
CKD car part imports, mostly used
by automobile joint ventures to assemble automobiles, then saw the import
tariff increasing by five percent, from 20 percent on average to 25 percent.
Six months later, the government
decided to raise the car (with less than 7 seats) and motorbike ownership
registration tax to five percent--applied to the registration in big cities and
provinces.
The decisions on raising the
import tariff on CKD imports and ownership registration tax then led to the car
price increase of 5-8 percent.
2004: luxury tax raised to 24 percent
Since 2004, the luxury tax
imposed on the cars with less than five seats rose from five percent to 24
percent, which was believed to lead to the 35 percent car price increase.
Anticipating the car price
increase, the automobile market got scorching hot in the last months of 2003,
when people rushed to buy cars at the moments to avoid the upcoming high taxes.
The unexpected demand increase then led to the terribly short supply. Those,
who tried to buy cars in 2003, were asked by the sales agents to pay additional
fee of nearly 1000 dollars to get deliveries in the year.
However, the scorching hot
automobile market turned cold in early 2004 with the sharp falls of sales. The
higher tax then drove to the 26 percent car sales in the year.
Since 2004, Vietnam began opening
its market for brand new complete-built-unit (CBU) cars, imposing the high
import tariff at 100 percent.
2005: luxury tax raised to 40 percent
In 2005, the car prices, once
again, skyrocketed amid the news that the luxury tax on sedans would be raised
to 40 percent. People rushed to buy cars in the fourth quarter of 2004 to avoid
the higher tax applied as of early 2005.
The sharp increase of the demand
then prompted automobile manufacturers to increase their capacity.
However, the market later turned
frozen with no buyers, because the tax was raised. As a result, the automobile
market in 2005 witnessed the sales down by 32 percent.
No one could imagine that the car
market bounced back in late 2005, when customers were told that the luxury tax
would increase to 50 percent commencing from 2006.
2006: Luxury tax raised to 50 percent
The car prices increased sharply
in 2006, with the sedan models seeing the price up by 3000-5000 dollars. Only
seven seat cars saw the price increases of less than 3000 dollars, explained by
the fact that the luxury tax on the cars was low at 30 percent.
Since 2006, used cars have been
allowed to enter Vietnam. However, used car import consignments could only go
through the four seaports in HCM City, Da Nang, Hai Phong and Cai Lan, and
borne very high import tariff of 458-600 percent.
In 2006, the Ministry of Finance
released the decision on lowering the import tariff on CBU imports from 100
percent to 90 percent.
Tran Thuy
Business & Investment Opportunities
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