Auto industry needs amended taxes to compete with import surge

Large automobile production and assembly projects need to have policy incentives

Great competitive pressure

According to a report by the Ministry of Industry and Trade (MoIT), nearly 40 enterprises manufacture and assemble cars in Vietnam with a total designed capacity of over 680,000 vehicles a year. Due to favorable policies, many large-scale automobile manufacturing and assembly projects have been launched in Vietnam. However, due to import tax incentives, the number of imported cars to Vietnam has increased rapidly.

At a recent conference on solutions for promoting the development of Vietnam’s mechanical industry, Minister of Industry and Trade Tran Tuan Anh said the domestic automobile industry only operates in a low segment of the manufacturing chain. “Domestic automobile production and assembly have not met the requirements of a real automobile industry, not yet mastered core technologies or formed a network of large-scale material suppliers and component producers,” the minister commented.

Toru Kinoshita, General Director of Toyota Vietnam cum Chairman of the Vietnam Association of Automobile Manufacturers (VAMA), mentioned a series of difficulties for domestically made cars, such as a very small automobile market compared to Thailand and Indonesia but with higher production costs. In addition, Vietnam now has fewer component and part producers than other regional countries - only about 200, while this figure in Thailand is 10 times higher.

Preferential policies for localization

Toru Kinoshita suggested that Vietnam promote localization by offering import tax exemptions and reductions for component manufacturers. It also needs to maintain a stable growth market for the support industry and accelerate the localization of medium-sized steel and plastic components.

Representatives from the Thanh Cong Group JSC and Truong Hai Auto Corporation also proposed that the government refrain from imposing import taxes on materials and auxiliary components to manufacture localized components; and adjust the special consumption tax (SCT) in a manner compatible with the localization rates.

The MoIT and the State Bank of Vietnam are considering a proposal for preferential lending to buyers of domestic cars. The MoIT has submitted a report to the National Assembly to amend and finalize reasonable tax and fee policies to help domestic enterprises raise localization rates, reduce vehicle prices, and increase competitiveness with imported cars. It will also study a proposal to remove SCT on domestically made values applied for under-nine seat cars during a 5-10 year period and on electric and environmentally friendly cars.