VietNamNet Bridge - The Ministry of Industry and Trade (MOIT) has reaffirmed Vietnam’s strong determination to develop its automobile industry and its policy on supporting automobile manufacturers. However, investment incentives will be given only to large projects.

Toyota, the Japanese automobile manufacturer, last week made a series of claims in exchange for its stay in Vietnam to help Vietnam develop an automobile industry. 

The manufacturer asked the government to give financial support so that it can continue manufacturing cars in Vietnam.

Toyota has proposed to change the way of calculating luxury tax on CKD (complete knocked down) cars, saying that the taxable price should be the factory price instead of selling price.

It has also proposed to the government of Vietnam to lower import tariffs on CKD parts imported from Japan from 15-25 percent to zero percent.

Regarding the luxury tax, it has asked to either lower the luxury-taxed price by 20 percent or cut the tax rate from 45 percent to 35 percent.

Fourth, it asked for a lower corporate income tax for automobile manufacturers.

And fifth, it asked to prop up 50 percent of the price gap between domestically made cars and import cars.

If the government of Vietnam approves these proposals, Toyota will stay in Vietnam and make every step to increase locally made contents to cut production costs. The localization ratio in Toyota’s products in Vietnam would be 20-37 percent higher by 2020-2025.

Before lodging proposals at the meeting between Vietnamese MOIT and Japanese Ministry of Economy, Trade and Industry, a Toyota Vietnam senior executive said the manufacturer may stop making cars in Vietnam, but would import cars to sell domestically.

Dat Viet quoted an MOIT senior official as saying that Toyota’s proposal is “unacceptable” because the investment incentives, if approved, will be contrary to the WTO’s principle of equal treatment.

Local newspapers, reporting Toyota’s proposal, commented that if Vietnam accepts to give such investment incentives, it will have to pay a heavy price for the Japanese manufacturer’s commitment to continue its production in Vietnam.

The MOIT official estimated that if Vietnam accepts to prop up 50 percent of the price gap between domestically made and import cars, it would have to pay VND40 trillion, or $2 billion.

It is still unclear what would happen with Vietnam’s automobile industry once foreign manufacturers leave Vietnam or shift to trade cars instead of assembling cars in Vietnam. 

MOIT, while affirming Vietnam will continue giving support to automobile projects, said investment incentives would be given only to large projects with the capacity of 100,000 cars or more per annum.

Tran Thuy