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Inconsistent policies burden VN automobile industry

Car sales dropped sharply by 40 percent in Q1 2020 as several industries cannot reach agreement on solutions to develop the automobile industry.

The car sales in Q1 reported by the Vietnam Automobile Manufacturers’ Association (VAMA) were the lowest since 2016: 52,557 cars were sold, a 32.8 percent decrease compared with the same period last year.

 

 

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This included 33,174 domestically assembled cars (- 28 percent) and 19,383 imported cars (- 39 percent).

The association has asked for a 50 percent vehicle registration tax cut to be applied to domestically assembled cars and other preferences, emphasizing that the support is necessary to help automobile manufacturers overcome current difficulties.

While the Ministry of Industry and Trade (MOIT) advocates the idea, the Ministry of Finance (MOF) has shown its disagreement. 

The car sales in Q1 reported by the Vietnam Automobile Manufacturers’ Association (VAMA) were the lowest since 2016: 52,557 cars were sold, a 32.8 percent decrease compared with the same period last year.

MOF affirmed that if Vietnam does this, it may violate WTO’s commitment on non-discriminatory treatment between domestically made products and imports.

However, MOIT insists on the registration tax reduction. In reply to the MOF warning, MOIT said it has learned international experience and found that some WTO members apply similar measures without meeting reactions from other countries.

Meanwhile, some analysts don’t think the 50 percent vehicle registration tax cut will help develop the automobile industry.

They said the registration tax accounts for a very small proportion of the total value of a car. People buy cars if they have good financial conditions and need to use cars, not because the registration tax is low.

Enterprises have also complained about the problems with car imports. The Indonesian government, in an effort to restrict contacts to prevent the coronavirus spread, has decided to suspend the granting of C/O form D (certificate of origin for the products sourced from ASEAN). This C/O has been replaced with a new form with QR Code and electronic C/O.

The problem is that the unit of measurement on the invoices doesn’t match with the unit of measurement on C/O. As a result, the new C/O is not accepted by Vietnam’s customs agencies.

Meanwhile, if importers submit the C/O 30 days or more late, they won’t be able to enjoy preferential tariffs as stipulated in CEPT (Common Effective Preferential Tariff).

Car importers also complain that the administrative procedures are too complicated and take too much time, money and labor force.

Meanwhile, state management agencies can use electronic declaration services with connections between customs and registration agencies. If so, enterprises would not have to spend too much time on procedural papers and save money for production recovery.

Automobile manufacturers had to halt operations for a couple of weeks in April when the Prime Minister launched the social distancing policy. However, most of them have resumed operation. 

Mai Lan

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