Elimination of tax on locally made auto parts: Will it accelerate industry growth?

08:41 | 18/09/2019 Industry

(VEN) - The Ministry of Industry and Trade will coordinate with other government agencies to formulate a proposal for eliminating the special consumption tax on locally manufactured auto parts and components.

will it accelerate industry growth

According to the Industry Department under the Ministry of Industry and Trade, Vietnam’s automobile industry has developed rapidly in the past two years. Some types of products have been exported to Laos, Cambodia, Myanmar, and Central America.

Vietnam currently has more than 170 automobile manufacturing and assembly enterprises, with total designed and installed capacity of about 500,000 vehicles per year. “Light trucks of less than seven tonnes, passenger cars with 25 seats or more, and locally-manufactured special-purpose vehicles have reached high local content rate, meeting the set targets and market demands,” Truong Thanh Hoai, director of the Industry Department said.

However, the automobile industry is currently participating in the low segment of the manufacturing chain, heavily depending on global automobile corporations’ manufacturing assignments, Hoai said, adding that the industry has not mastered core technologies such as engines, control systems and transmission systems and has not yet established a system of large-scale suppliers of raw materials and components.

The local content rate for cars with nine seats and fewer is still lower than the set target, and much lower than in other countries in the region. The products, which have been localized, have very low technology content such as tires, seats, mirrors, glass, wires, batteries and plastic products. In addition, Vietnamese products are facing fierce competition from imported ones, especially those from other ASEAN countries such as Thailand and Indonesia, as well as from members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA) in the next 7-10 years.

To develop the Vietnamese automobile industry, the Ministry of Industry and Trade will coordinate with ministries and departments to propose new policies, which focus on accelerating car manufacturing and assembly projects of large corporations and attracting investment from multinational companies. In addition, the ministry will coordinate with relevant agencies to propose the elimination of the special consumption tax on locally manufactured auto parts and components, with a policy duration of 5-10 years.

Minister of Industry and Trade Tran Tuan Anh asked the Industry Department to continue discussing solutions on the

basis of enterprises’ proposals to create momentum for the automobile industry’s development, including tariff

reductions and market size expansion for the industry.

Viet Anh