Toyota could cease making cars in Vietnam on coming tax cut

16:10 | 06/04/2015 Companies

The Vietnamese unit of the world’s largest carmaker Toyota is considering putting an end on production and switch to import to enjoy the preferential tax treatment a trade pact will offer in the next three years.

Toyota could cease making cars in Vietnam on coming tax cut

Toyota Motor Vietnam could cease making cars in Vietnam and import from other ASEAN countries to enjoy the zero import duty in 2018, President Yoshihisa Maruta said at a meeting to announce the company’s operation plans for 2015 on April 2.

Toyota Motor Vietnam currently has to import most of the spare parts for its production in the Southeast Asian country, and there will soon come the day when importing a complete car from Thailand is cheaper than assemble it in Vietnam, Maruta said.

The Japanese president, who is also chairman of the Vietnam Automobile Manufacturers' Association (VAMA), said the year 2018 will be a big issue for the carmaking industry.

Passenger cars with fewer than 24 seats, 40 percent of whose parts are manufactured by ASEAN countries, are currently subject to a 50 percent import duty. The rate will be lowered to zero in 2018, under the Common Effective Preferential Tariff agreement.

ASEAN is a ten-member bloc which includes such Southeast Asian countries as Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar, and Vietnam.

Industry insiders say it is more profitable to sell imported cars than those that are domestically assembled.

Last year the Vietnamese government approved the planning for the automaker industry between 2015 and 2020, with a vision to 2030.

But there are no specific policies included in the planning, the Toyota Motor Vietnam chief executive complained, saying this left the company “being unable to know what to do next.”

The carmaker is thus waiting for an action from the government to have the answer as to whether it will stop making cars in Vietnam or not.

Without a support from the government, the domestic carmakers will surely fall into trouble, he warned.

The businesses under the VAMA will then have to import complete cars for sale rather than assembling domestically, he added.

Toyota Vietnam sold 41,205 cars in 2014, a 24% increase from a year earlier, according to data released at the on April 2 meeting. Of these, 34,778 vehicles are domestically assembled.

The company accounted for 31% of the total sales among the VAMA businesses.

Toyota Motor Corp meanwhile has plans to spend some US$1.3 billion two build a new plant in China in 2018, and another in Mexico a year later, AFP reported on April 3, citing reports by the Japanese business daily Nikkei and Japan’s public broadcaster NHK.

The Chinese factory will be built in Guangzhou, whereas the Mexico plant will be located in the state of Guanajuato, according to the Nikkei.

The move is aimed at boosting the world’s largest carmaker’s production capacity by some 300,000 units a year in a bid to better compete with global rivals, according to AFP.

Source VOV News