VietNamNet Bridge – Right after hearing the news that the Ministry of Finance will slash the import tariff on less than nine seat cars sourced from ASEAN countries to 70 percent, many people decided to delay their car purchase plan, hoping to buy cheaperlater, when the new tariff comes to effect. However, they have been warned that the prices may not go down.

On October 26, 2010, the Ministry of Finance sent a dispatch to the Ministries of Industry and Trade, Planning and Investment, Transport, the Vietnam Automobile Transport Association and the Vietnam Automobile Manufacturers’ Association (VAMA), confirming the reduction of the import tariff on less-than-9-seat cars sourced from ASEAN countries from current 83 percent to 70 percent.

Meanwhile, the tariff will remain83 percent on the imports from non-ASEAN countries (excluding the 4WD automobiles which will enjoy the tax reduction from 77 percent to 73 percent, and over 2500 cc automobiles from 80 percent to 77 percent as per WTO commitments).

This means that while the tariff on the imports from ASEAN countries is lowered to 70 percent, the automobiles with the cylinder capacity of less than 2500 cc sourced from non-ASEAN countries such as South Korea, Japan, the US, Taiwan and Germany will still be subjects to current tariffs.

Meanwhile, VnMedia newspaper quoted its sources as saying that cars from ASEAN countries (mostly from Thailand) only account for a small proportion of all imports. nowadays Car showrooms only display a limited number of models imported from Thailand, such as Toyota Hilux (Vigo), Honda Jazz (Fit), Honda Accord, Nissan Tida, or Nissan X-Trail.

According to the General Department of Customs (GDC), in the first 10 months of the year, Vietnam has imported over 2000 cars from ASEAN, including 290 cars from Indonesia worth $2.9 million, 2150 cars from Thailand worth $40 million. The number accounted for a very small proportion of the total 41,570 cars imported.

Therefore, analysts do not believe that the tax reductions will have big impacts on the market.

One would note that the cars sourced from South Korea now account for a big proportion of the imported cars. GDC said in the first 10 months of the year, Vietnam imported 22,000 cars from South Korea, 50 percent of the total imports. Besides, Vietnam is also importing cars from the US (2900), Japan (4250), Taiwan (3570), China (3330), Germany (1260) and the Middle East. And these are the main supply sources for Vietnam. That explains why the prices of the majority of import cars will not decrease in 2011.

In principle, Vietnamese importers may shift to cars from Thailand and some other ASEAN countries instead of the US, Japan or Europe. However, the problem is that the number of models manufactured for export in these countries is modest. Therefore, analysts believe that in the time to come there will not be a massive increase in the number cars from othe countries in the region to Vietnam.

If one is planning to buy a car sourced from an ASEAN country, he should wait for tariff cuts. However, if he wants a car from South Korea, Germany or the US, he should not wait, because tariff cuts here are not likely to be in introduced in 2011.

According to the 2011 White Book of Eurocham, the imports under the mode of CBU (complete built unit) account for 30 percent of the market share. The Eurocham believes that with Vietnam’s WTO membership and many other international treaties of which Vietnam is a member, more and more imports will arrive in Vietnam in the time to come, thus putting a large pressure on the domestic automobile industry.

However, Eurocham still believes that if the Government has long term and transparent policies for the automobile industry development, Vietnam will be able to develop an industry of its own, or even become an automobile manufacturing centre in ASEAN and a big exporter.

C. V