Carmakers fume over fees

Vietnam-based car-makers are feeling the heat after Hanoi and Ho Chi Minh City lifted automobile ownership registration tax rates.

These higher fees are part of the cities’ efforts to reduce chronic traffic congestion but industry players are crying foul.

Toyota Motor Vietnam (TMV) general director Akito Tachibana, who is also chairman of Vietnam Automobile Manufacturers’ Association (VAMA), told VIR the two cities’ higher automobile ownership registration tax rates coupled with raised fees for number plates, “will undoubtedly affect the local auto market [which] inherently depends on consumption in these two biggest cities”.

Ownership registration fees in Hanoi for vehicles with fewer than 10 seats have soared to 20 per cent on January from the former 12 per cent. Meanwhile, the rise in Ho Chi Minh City will be from 10 per cent to 15 per cent. In addition, the cost of number plates has doubled in Hanoi.

The TMV general director said: “This means there is a high possibility of reduced market demand. Certainly, we will have to reconsider plans for our next year. Moreover, TMV’s production plan until 2018 – when the Common Effective Preferential Tariff Scheme inked between the ASEAN countries is officially applied – will be the great challenges for TMV”.

Industry insiders from Honda Vietnam and Mercedes also said this new tax regime would affect these two auto-makers. A source from GM Vietnam told VIR this new policy would likely place greater burdens on local manufacturers.

“It indirectly affects companies’ production and business, as consumer demand for automobiles will decrease. They will have to make think long and hard about buying cars if registration fees stay this high,” he said.

Meanwhile, a Mercedes insider said to cope with the increased automobile ownership registration tax rates, Mercedes had last week launched a programme in which it would support customers by paying 3 per cent of their registration fees.

“We want to bear part of our customers’ registration fees. In the long term, we will have more policies to support customers, depending on market developments,” the source said.

Tachibana said the new ownership registration fees for automobiles along with the government’s set economic indicators in 2012 meant TMV was forecasting that 2012 would be “a very difficult year and VAMA’s estimated sales will fall about 20 per cent against 2011’s”.

The European Chamber of Commerce in Vietnam recently recommended avoiding any increases or tax changes and suggested that the government keep all tax policies affecting the automotive sector stable.

“Frequent and drastic changes in taxes including registration tax significantly disrupt production lines, supply chains and retail operations of automotive players by creating artificial peaks and troughs in market demand,” the peak body said in its White Book.