According to MOF, the tax rates of 80%, 85% or even 90% on CBU cars all come in line with WTO commitments. When Vietnam joined the WTO, the maximum tax rate on cars it committed to was 100%, gradually decreasing in subsequent years.
Explaining the tax cuts from 90% to 80%, 70% and then to 60% in 2007, MOF said that Vietnam went ahead of the tax cut roadmap. Vietnam now can apply the ceiling level of 95%.
MOF said that the new tax rates will be applied at the soonest possible time as an urgent measure to reduce the trade deficit.
Meanwhile, it remains unclear about the tax rates to be applied on car part imports. MOF has just asked MOIT to check the list of car parts and classify which parts can be made domestically and which cannot. MOF will heavily tax parts which can be made locally, and vice versa.
All the moves taken recently and to be taken in the time to come by the government all aim at restricting car consumption in an effort to curb inflation.
The Vietnam Automobile Manufacturers’ Association (VAMA) has announced satisfactory sales in March with 13,091 units sold. However, analysts say that the situation will not be as satisfactory in April as a result of the government’s policy to restrict car consumption.
Pham Huu Tam, Director of HCM City-based Tradoco, specialising in car imports, said that if the import tax is raised to 90%, and the registration and luxury taxes both also increase as planned, the prices of import cars will increase by 30-40% at least.
MOF has also threatened to raise the tax rates on import car parts, which also means the price increases of locally made cars. The higher import taxes coincide with the 5-10% higher prices of sets of car parts due to the steel price increases.
Analysts have warned that the market of less-than-12-seat cars will become quiet in the time to come due to the higher prices of cars and lower demand.
The anticipated car price increases are prompting people to rush to buy cars at this moment. A salesman at Toyota Lang Ha Showroom said that the number of clients who have signed contracts on purchasing cars in order to avoid price increases has risen by 10%.
Local automobile manufacturers still ‘owe’ a big number of cars to their clients. Toyota owes 5,000 units, and Ford 1,000. The two manufacturers have decided to raise the capacity of their production lines to 25,000 units and 9,500 units, respectively.
The number of clients booking to buy import cars has also been increasing. Huynh Du An, General Director of Euro Auto, which distributes BMW, said that though the price has soared by 15%, there are still a lot of buyers.
Hai Phong-based Vinh Hoang Company also said that more and more clients want to book cars, but the company dare not sign contracts, because it does not know when taxes will increase.
The changeable tax policies have been worrying local manufacturers. Nubohiko Murakami, General Director of Toyota Vietnam, said that the changeable policies make the market unpredictable, and it is difficult for manufacturers to set their business plans.
Meanwhile, car importers hope that the policy on restricting car consumption will not last for long. They hope that once inflation is curbed, the measures will be removed.
Local manufacturers are still following their plans to expand production and business. Toyota and Ford say that they are moving ahead with their previously set plans of production expansion. Meanwhile, import companies say that they will launch new models onto the market.
Most recently, Hyundai Motor said that it was getting ready to introduce a luxury sedan model.