Vietnam to protect domestic automobile production until 2018

The Ministry of Industry and Trade (MOIT) is drawing up a plan under which Vietnam will continue protecting domestic automobile production until 2018 by imposing high tariffs on cars and car parts which can be made domestically.

Under commitments on trade liberalization made by Vietnam under the framework of ASEAN/AFTA (ASEAN Free Trade Agreement), by 2018, Vietnam will have to fully open its automobile market.

Therefore, in an effort to prepare domestic automobile manufacturers for that time, when cars will likely be imported on a massive scale to Vietnam, MOIT has submitted to the Prime Minister measures to help improve the competitiveness of the domestic automobile industry

Under the plan, MOIT has proposed applying reasonably high tariffs on cars imported to Vietnam under the mode of complete built units (CBU), and car parts imports which can be made domestically, or which Vietnam encourages investment in.

Because products for making car parts in Vietnam still cannot be made domestically, MOIT has proposed applying the zero import tariff, or the lowest possible import tariff allowable under Vietnam’s current trade agreements.

Regarding buses and trucks, which are considered production materials, fuel-saving and environmentally friendly automobile products, the ministry has proposed the Government submit to the National Assembly a special preferential mechanism: allowing a cut to the value added tax (VAT) by 50 percent from the current level.

MOIT has expressed its viewpoint that it is necessary to give preference to investment projects of the automobile industry. For example, the projects on making car parts should be considered the projects on the list for investment encouragement, which will be use the state’s investment and development capital. The projects will also be given support in terms of technology transfer, software purchase and training.

If truck and bus production projects have a locally -made content percentage of 60 percent or higher, they will be given support with the state’s investment capital.

According to MOIT, the government needs to apply measures to stimulate demand by giving interest rate subsidies and providing sufficient loans to consumers who want to purchase cars made by domestic manufacturers.

Under WTO commitments, all vehicles which carry passengers will have the same tariff of 47 percent by 2017.

Under ASEAN/AFTA, the import tariff on vehicles with less than nine seats which carry people will be zero percent by 2018.

Meanwhile, under the ASEAN commitments, and under commitments under the framework of ASEAN-China and ASEAN-South Korea, tax rates on car parts and accessories will be at a low level of five percent within ASEAN and will be lowered to zero percent under the framework of ASEAN-China commitments.