Higher income and increasing import volume
According to the initial statistics of the Vietnam General Statistics Office (GSO), auto imports surge 82.8% in volume and 91% in value on-year for the eleven months January-November of 2015. In this period, Vietnam imported 112,000 cars, light duty trucks and other automotive vehicles valued at US$2.579 billion, mostly coming from China, the Republic of Korea, Thailand, India and Japan.
Based on the release of the figures by the GSO, the Vietnam Automobile Manufacturers’ Association (VAMA) revised its forecast for auto exports for calendar year 2015 to 210,000, an all-time record high, and nearly doubles last year’s figure.
Source: Vietnam General Statistics Office
Rapid urbanization and rising incomes is pushing Vietnamese consumersto look for the comfort and safety of automobiles, instead of the using motorbike.The last few years have witnessed a surge in imported cars which now make up about 40 per cent of sales. There has been particularly robust recent growth in luxury cars, thanks to Vietnam’s fast-growing business and market political stability.It is not difficult to see luxury and famous branded car in Vietnamese streets. Sales of Mercedes-Benz cars, for example, grew 43 per cent in 2014, making Vietnam the second-fastest growing global market for the German carmaker. Higher income consumers welcome also products of Rolls-Royce and Bentley, the two firms recently opened their first dealerships in Vietnam.
Tax policies and the future of automobiles market
Imported automobiles is expected to add to the boom in the domestic market in the near future as Vietnam will reduce its car-import tax to zero percent by 2018, under the ASEAN Trade in Goods Agreement.
The ASEAN Economic Community (AEC) has brought about the elimination of tariffs for the 10 ASEAN nations plus the six countries - China, the Republic of Korea, Japan, India, Australia and New Zealand - which form the Regional Comprehensive Economic Partnership (RCEP).
According to details in a number of new articles of the revised law, under the decree 108/2015/ND-CP, the new special consumption tax, which will be set equal to the importers' price, will replace the current one. It has been calculated keeping in mind their cost, insurance, and freight (CIF) value plus current import tariff. The tax for imported cars with 24 seats and below will be equal to the importer's price but not lower than 105% of the cost price, which includes the car's import price plus import tax and special consumption tax. If it is lower than this level, the tax will be fixed by a tax agency following regulations on tax management. For the 24-seater cars assembled and manufactured in Vietnam, the tax will be equal to the carmakers' wholesale price but this price will not be lower than 7% compared with the average prices of automobile businesses.
In another point of view, people say that the price of imported cars looks set to rise sharply when the Government introduce of a “special consumption tax” affecting duties paid on the advertising, display and warranty of all imported vehicles with less than 24 seats. The new tax will push up prices of imported cars by as much as 12 per cent. As local produces do not exploit the luxury segment, this policy may create advantages for them.
The ReportLinker forecasts that Vietnam automobile industry will continue to grow significantly in coming years, bringing up opportunities for players planning to jointhe market. Driven by rising domestic demand and tax reforms implemented proactively by the government, the country’s automobile sector has been reporting positive growth rates. Considering the mentioned factors, this research firm forecasts that the sale of automobiles in Vietnam will grow at a CAGR of around 8.2% during 2014-2018. And may be, the import will increase (as analyzed above), but the local production will grow also, thanks to the development of supporting industries and improvement in income and living standard of Vietnamese consumers.
