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Car Market: Pressures on Vietnamese Automobiles
2009-1030
The roadmap to cut import tariffs following WTO entry is causing a heavy pressure on automakers in Vietnam which have long relied on protectionism. Made-in-Vietnam cars are under a heavy pressure of imported vehicles in an unequal rivalry.
Recently, the Ministry of Industry and Trade has recently hosted a seminar on “Strategic line in passenger car segment of the Vietnamese automotive industry.”
Tax-evaded imported cars?
According to the Vietnam Automobile Manufacturers’ Association (VAMA), many car importers declare falsely low import prices and sale prices in order to evade taxes. As a result, the State will lose a handsome amount of imported tax, special consumption tax and value-added tax. In a letter sent to the Ministry of Finance and the Ministry of Industry and Trade, VAMA pointed out worsening trade fraud in importing of completely built cars.
VAMA feared the market share of imported four-wheelers will continue to widen and cause negative impacts on the fledging automobile industry. It said with falsely lowered prices and taxes, the market share of imported vehicles will surpass that of carmakers in the country.
To facilitate inspection activities, VAMA pledged that its member companies will provide full information on VIN numbers, body numbers, models, makes, exporting countries, exporting companies and their addresses.
According to the contents of Common Effective Preferential Tariff Scheme for the ASEAN Free Trade Area (CEPT/AFTA) coming into effect in September 1992, four later-joining countries, namely Vietnam, Laos, Myanmar and Cambodia will have to cut import tariffs to 0-5 % on all commodities by 2018. Previously, the roadmap was completed by six ASEAN founding countries, namely Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand.
The tax reduction roadmap leads to price disadvantage of domestically assembled cars to imported units.
Amid VAMA’s recommendations on the “uncontrolled” flooding of imported vehicles and the distress of the domestic automotive industry, some disagreed, citing VAMA’s member companies actually failed to meet the demand by the very hot automobile market and the presence of imported vehicles is necessary.
In other aspect, VAMA attributes their high prices of cars to many taxes and fees. However, importers have to bear even higher tax rates than VAMA members.
In principle, it is obvious that a competitive product needs to gather many factors, including large sales to offset equipment and technology depreciations. However, it is extremely difficult for VAMA to explain why its member companies let their customers wait half a year to receive the purchased cars. Without imported cars, VAMA will surely rule the roost on the market and it will not mature while the integration roadmap is coming nearer. If carmakers in the country insist on the method adopted nearly 20 years ago, they will remain assemblers for good. High selling prices and then failure on the home market are unavoidable.
Pressure on domestic cars
At the seminar held on October 8, many specialists slit the pressure on the future of the Vietnamese automobile industry into two aspects. The first is the roadmap to cut taxes in line with WTO entry commitments and CEPT/AFTA agreement and the second is the increasing advantage of imported automobiles against assembled-in-Vietnam products.
Recently, analysts and carmakers repeatedly mention the tax reduction roadmap applied to vehicles imported from ASEAN countries. According to the roadmap, all completely built vehicles from ASEAN nations will be zero % in 2018. Then, prices of imported vehicles will be much lower than locally assembled ones if domestic carmakers do not lower the price and enhance competitiveness.
These are the weak points of domestic automakers. Instead of taking the time gap to improve competitiveness and push back the penetration of imported vehicles, they repeatedly urged the Ministry of Finance and other authorities to adjust taxes and fees.
Recently, the Ministry of Industry and Trade submitted a report on plans to limit trade deficit from now to the end of the year, including a proposal to apply the ceiling tax rate of 91 % on imported automobiles. Then, VAMA “accused” car importers of trade fraud. In the latest development, the General Department of Customs (GDC) has sent the Document 5931/TCHQ-KTTT to local customs offices to keep a specially close watch on imported goods, including automobiles and motorbikes in order to curb trade fraud. Specially controlled imports include automobiles, motorcycles, air conditioners, washing machines, construction steel, wine and beer, clothing and apparel accessories.. Then, VAMA In the latest development, the General Department of Customs (GDC) has sent the Document 5931/TCHQ-KTTT to local customs offices to keep a specially close watch on imported goods, including automobiles and motorbikes in order to curb trade fraud. Specially controlled imports include automobiles, motorcycles, air conditioners, washing machines, construction steel, wine and beer, clothing and apparel accessories.
According to the General Department of Customs, trade fraud tends to increase. Thus, a close watch is obviously essential, especially so-called sensitive goods and big-valued items. Watch-listed imports need careful price reference and other actions before customs clearance.
Recently, the Ministry of Industry and Trade has recently hosted a seminar on “Strategic line in passenger car segment of the Vietnamese automotive industry.”
Tax-evaded imported cars?
According to the Vietnam Automobile Manufacturers’ Association (VAMA), many car importers declare falsely low import prices and sale prices in order to evade taxes. As a result, the State will lose a handsome amount of imported tax, special consumption tax and value-added tax. In a letter sent to the Ministry of Finance and the Ministry of Industry and Trade, VAMA pointed out worsening trade fraud in importing of completely built cars.
VAMA feared the market share of imported four-wheelers will continue to widen and cause negative impacts on the fledging automobile industry. It said with falsely lowered prices and taxes, the market share of imported vehicles will surpass that of carmakers in the country.
To facilitate inspection activities, VAMA pledged that its member companies will provide full information on VIN numbers, body numbers, models, makes, exporting countries, exporting companies and their addresses.
According to the contents of Common Effective Preferential Tariff Scheme for the ASEAN Free Trade Area (CEPT/AFTA) coming into effect in September 1992, four later-joining countries, namely Vietnam, Laos, Myanmar and Cambodia will have to cut import tariffs to 0-5 % on all commodities by 2018. Previously, the roadmap was completed by six ASEAN founding countries, namely Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand.
The tax reduction roadmap leads to price disadvantage of domestically assembled cars to imported units.
Amid VAMA’s recommendations on the “uncontrolled” flooding of imported vehicles and the distress of the domestic automotive industry, some disagreed, citing VAMA’s member companies actually failed to meet the demand by the very hot automobile market and the presence of imported vehicles is necessary.
In other aspect, VAMA attributes their high prices of cars to many taxes and fees. However, importers have to bear even higher tax rates than VAMA members.
In principle, it is obvious that a competitive product needs to gather many factors, including large sales to offset equipment and technology depreciations. However, it is extremely difficult for VAMA to explain why its member companies let their customers wait half a year to receive the purchased cars. Without imported cars, VAMA will surely rule the roost on the market and it will not mature while the integration roadmap is coming nearer. If carmakers in the country insist on the method adopted nearly 20 years ago, they will remain assemblers for good. High selling prices and then failure on the home market are unavoidable.
Pressure on domestic cars
At the seminar held on October 8, many specialists slit the pressure on the future of the Vietnamese automobile industry into two aspects. The first is the roadmap to cut taxes in line with WTO entry commitments and CEPT/AFTA agreement and the second is the increasing advantage of imported automobiles against assembled-in-Vietnam products.
Recently, analysts and carmakers repeatedly mention the tax reduction roadmap applied to vehicles imported from ASEAN countries. According to the roadmap, all completely built vehicles from ASEAN nations will be zero % in 2018. Then, prices of imported vehicles will be much lower than locally assembled ones if domestic carmakers do not lower the price and enhance competitiveness.
These are the weak points of domestic automakers. Instead of taking the time gap to improve competitiveness and push back the penetration of imported vehicles, they repeatedly urged the Ministry of Finance and other authorities to adjust taxes and fees.
Recently, the Ministry of Industry and Trade submitted a report on plans to limit trade deficit from now to the end of the year, including a proposal to apply the ceiling tax rate of 91 % on imported automobiles. Then, VAMA “accused” car importers of trade fraud. In the latest development, the General Department of Customs (GDC) has sent the Document 5931/TCHQ-KTTT to local customs offices to keep a specially close watch on imported goods, including automobiles and motorbikes in order to curb trade fraud. Specially controlled imports include automobiles, motorcycles, air conditioners, washing machines, construction steel, wine and beer, clothing and apparel accessories.. Then, VAMA In the latest development, the General Department of Customs (GDC) has sent the Document 5931/TCHQ-KTTT to local customs offices to keep a specially close watch on imported goods, including automobiles and motorbikes in order to curb trade fraud. Specially controlled imports include automobiles, motorcycles, air conditioners, washing machines, construction steel, wine and beer, clothing and apparel accessories.
According to the General Department of Customs, trade fraud tends to increase. Thus, a close watch is obviously essential, especially so-called sensitive goods and big-valued items. Watch-listed imports need careful price reference and other actions before customs clearance.
Source: Kim Nhung (VCCI)
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