New tax policy restricts import of Chinese vehicles

Higher import tariffs proposed by the government are expected to restrict imports of trucks and specialized vehicles from China.

The Ministry of Finance (MOF) has made public the draft of Decree 125 on preferential import/export tariffs, under which some specialized vehicles such as refrigerator trucks, waste collection vehicles and cement tanker trucks would be taxed 25 percent instead of 20 percent.

New tax policy restricts import of Chinese vehicles

The ministry has also proposed raising the import tariff on concrete mixer trucks from 15 percent to 20 percent.

Explaining the decision, MOF said domestic automobile manufacturers now can manufacture medium and heavy trucks and specialized vehicles, with the total capacity of 45,000 products a year, which is bigger than market demand by three times. The adjustment of tax will encourage domestic production.

Explaining the decision, MOF said domestic automobile manufacturers now can manufacture medium and heavy trucks and specialized vehicles, with the total capacity of 45,000 products a year, which is bigger than market demand by three times. The adjustment of tax will encourage domestic production.


Meanwhile, the tariffs applied in other regional countries such as Thailand and Malaysia are much higher, 40-60 percent, than Vietnam.

Analysts believe that the tax hike will keep Chinese vehicles, especially trucks, away from the market because the products will be less competitive compared with domestically assembled ones.

According to Bui Xuan Truong, director of Truong Thanh Automobile, Chinese vehicles dominated the domestic market previously because they were cheaper than domestically made products, while their prices were just half of the imports from Japan and South Korea.

However, truck imports from China decreased in 2015, when MOF raised tariffs on some truck lines. The imports will continue to drop with MOF’s latest move.

However, analysts still doubt the tax hike will restrict Chinese imports.

 

Phung, a truck dealer in district 12, HCMC, said Chinese trucks still account for 50 percent of total trucks sold thanks to the low prices.

Chinese Howo, Dongfeng, Sinotruck and JAC products are priced at VND1 billion in Vietnam, while the products of the same types sourced from South Korea and Japan are sold at VND1.5-1.8 billion.

If the tariff increases by 5 percent, Chinese trucks would be more expensive by tens of million of dong. However, with the prices, Chinese products would still be cheaper than Japanese and South Korean models.

Duc Manh, director of a truck trading company in HCMC, thinks the tax hike would decrease the number of imports from China, but the sales of Chinese products assembled in Vietnam would not decrease significantly. Vietnamese manufacturers would still feel the pressure of the competition, he said.

Nguyen Minh Dong, an automobile expert, said that raising import tariffs is a good solution to improve the competitiveness of domestic manufacturers. However, to help the industry develop in a sustainable way, the government needs to set reasonable policies to encourage domestic enterprises to make automobile parts so the localization ratio can be raised.


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