More seats, less gas the way to go

The Ministry of Industry and Trade has chosen cars with 6-9 seats and engines smaller than 1.5 liters as the strategic product line for Vietnam’s auto industry, which will benefit from various tax incentives.

In a proposal submitted to Prime Minister Nguyen Tan Dung, the ministry said the car line it has chosen can be used for different purposes while consuming less fuel than other models, local media reported.

The priority product line will be given preferential tax policies to develop. For example, the luxury tax rate on this car line will be 30 percent compared with the usual 45-60 percent, the Vietnam Economic Times cited the proposal as saying.

Consumers will also enjoy a 50 percent cut in value-added tax while vehicle registration fees of 10-12 percent will be slashed to only 2 percent, according to the newspaper.

The ministry has suggested manufacturers of the strategic car line be given tax breaks and all import duties on the materials and equipment be lifted as well.

The decision of the ministry closes the ongoing debate among local manufacturers over which car model should be chosen as the focus for future development. By choosing a brand new product line to give tax cuts to, the ministry said it wanted to treat all car makers fairly.

Manufacturers in Vietnam produce cars with 6-9 seats at present but use bigger engines. The smaller engines, of 1.5 liters and below, are typically used for four-seaters. Both products lines are in fact bestsellers in the country, the Vietnam Economic Times reported, citing the ministry’s proposal.

Tran Ba Duong, general director of Truong Hai Company, one of Vietnam’s leading car makers, told online news website VnExpress he supported the decision as the chosen product line would meet the demand of local consumers.

Preferential tax policies would enable car makers in Vietnam to expand production and cut prices, Duong said.

The Industry and Trade Ministry said it wanted local manufacturers to develop car models that have competitive price tags to help them fight imported products in the future.

Vietnam will open its local car market in 2018. Under the Common Effective Preferential Tariff commitments, import duties on cars from the Association of Southeast Asian Nations will be completely removed by then.

If approved by the Prime Minister, adoption and support for the strategic car line proposed by the ministry will be officially announced at the end of this year.