More people could afford imported cars from the EU when the EU-Vietnam Free Trade Agreement (EVFTA) takes effect from August 1.
Many goods imported from the EU into Vietnam will enjoy zero percent tax according to the tax reduction roadmap over the next seven to 10 years. Imported cars and spare parts are the most anticipated items. Currently, imported cars from the EU to Vietnam face taxes of 70%. The most expensive are cars imported from Germany, France and Italy.
According to commitments, vehicles with engines above 2,500 cc would enjoy a zero tax after nine years while those of less than 2,500 cc would have a zero tax after 10 years.
The Ministry of Finance's Department of International Co-operation said the ministry had built a tax cut plan for cars and other items to submit to the government. It would include regulations, timeframe and process and directives for ministries, departments and local authorities.
If the government cut tax by 7-9% each year, the prices of imported cars from the EU would significantly fall. More people would be able to afford imported cars. In another case, if the government cut tax by 15-30% a year in just two or three years, customers could see a huge price drop by VND300m or more in August if the market becomes more diverse and no trade protection measures are applied.
The majority of imported cars into Vietnam are Audi, Mercedes-Benz, BMW and Volkswagen. Each car costs about VND2bn.
According to the Vietnam 2035 report by the World Bank in Vietnam, if the growth rate of 7% is maintained in the next 10 years, income per capita in 2030 may reach USD10,400. More people are able to afford cars thanks to the rising middle class and as income disparity between urban and rural areas is reduced.
The Ministry of Industry and Trade predicts greater car usage in Vietnam in the coming time when the GDP per capita surpasses USD3,000 and there are over 50 cars per 1,000 people. In 2025, demand will be 800 to 900 cars a year and the consumption rate in the next five years will be 10.5%.
Both domestically-assembled and imported car dealers will have more opportunities with the new dynamic market. Dtinews
The Government’s decision to offer a zero-import tax rate on automobile components opens significant opportunities for the local industry to lower prices, enhance competitiveness and promote consumption.
Car prices in Vietnam are predicted to continue falling with many discount programmes due to large inventory and slow sales.