Auto market gets burning as people rush to buy cars to avoid high tax

The decision to increase the car ownership registration tax, the number plate registration and granting fee is believed to have big impacts on the automobile market. People are believed to be rushing to purchase cars prior to January 1, 2012, to avoid the new tax and fee policies.

As predicted, the Hanoi People’s Council on December 8 officially released the resolution on adjusting the regulations on some kinds of fees and tax on cars.

The ownership registration tax imposed on the cars with less than 10 seats will increase from 12 percent to 20 percent, while the fee for registering and getting number plates applied for these kinds of products will also increase to the ceiling level of 20 million dong from the current level of 150,000 dong.

The new tax and fee will be applied as of January 1, 2012.

According to the Hanoi People’s Committee, the increases of the car ownership registration tax and number plate registration fee aims to help curb the increase of the number of private vehicles, thus helping ease the traffic congestion, increase the tax collection to the state budget, so as to get money for public transport projects.

Nguyen Hai Son, Director of the Hanoi branch of Thanh Cong Group, the authorized importer of Hyundai, said that ownership registration tax is a kind tax calculated based on the car prices after counting on the original price, tax, and expenses by suppliers, therefore, the eight percent increase in the car ownership registration tax would push the car prices up very sharply.

“I believe that the car ownership registration tax would have very big impacts on the demand of the market, which will also influence the market and the operation of manufacturers and distributors,” Son said.

It is estimated that with the eight percent ownership registration tax increase, the buyer of a car with less than 10 seats and the value of one billion dong, would have to pay an additional sum of 80 million dong since the tax increases from 120 million dong to 200 million dong. Besides, he will also have to pay more for car number plate.

In general, after the new decision takes valid as of January 1, 2012, the cars with less than 10 seats would be 10 percent more expensive.

Hoang Thuc from GM Vietnam, the additional sums of money buyers have to pay would be not too sharp for luxury cars valued at several billion dong and higher. However, this would be a heavy burden for those, who buy middle class cars priced at 400-700 million dong.

“This has raised a worry that the automobile market in 2012 would be even gloomier than the worst moment of 2011,” he said.

People would rush to buy cars prior to January 1, 2012, in order to enjoy the current low tax and fee, or they would buy cars in other provinces and cities, where the tax and fee levels are lower, or they would buy used cars instead of brand new cars. These are the scenarios analysts say they expect to see in the time to come.

Son said that the demand is always very high in the last months of years, and the same thing will occur this year. Therefore, those, who still keep hesitant, will make decision to buy cars right now.

“I believe that the sales in December would increase significantly as people would try to buy cars prior to the new year,” he said. However, he also thinks that the increases would not too sharp, because banks now tighten their lending.

The new decision by the Hanoi’s authorities proves to be sad news for automobile manufacturers, but the good information for used car dealers. The decision said that those, who register cars for second and subsequent times, will still enjoy the current tax of 12 percent.