Debate Continues Over Reducing Import Tariffs for Vietnam’s Automobile Industry

December 25, 2014 Posted by Vietnam Briefing Reading Time: 4 minutes

HANOI – As Vietnam’s auto market continues to see strong growth in sales, uncertainty remains around the policies that will be applied to the importation of foreign manufactured autos, as separate branches of the government support different policy packages.

Vietnam’s Ministry of Industry and Trade (MoIT) has announced support for the tax on imported automobiles remaining at 50 percent until then end of 2017, and has proposed a range of incentives to stimulate the country’s domestic auto industry. However, the Ministry of Finance is backing a continuation of the 50 percent rate in 2015, followed by a reduction to 40 percent in 2016, and 30 percent in 2017.

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The two ministries have formally made their proposals to the National Assembly, however, it is not yet clear which will be approved. Vietnam is seeking to build up its domestic auto industry and is using the import tariffs as a tool to protect its local producers as they seek to become competitive with neighboring countries such as Thailand.

According to the Binh Duong customs administration, the Finance Ministry issued an order this month amending the vehicle import tariff in compliance with Vietnam’s tax reduction obligations under World Trade Organisation rules. Tariffs coming into effect on January 1, 2015 include a reduction in tariffs on motorcycles, sidecars, and mopeds from 47 to 40 percent, and a reduction on the duty of four-wheel-drive vehicles from 70 to 59 percent.

Vietnam will also cut its car import tariff incrementally over the next four years for goods originating in ASEAN countries, according to the ASEAN Trade in Goods Agreement. The current import tariff of 50 percent is expected to be reduced to 35 percent in 2015, 20 percent in 2016, 10 percent in 2017, and will be zero in 2018. Despite these tariff reductions, the National Assembly has announced that the special consumption tax will remain at current levels.

Automobile sales have climbed throughout the year, with an average of 12,500 units per month sold in 2014. This number peaked in September, reaching 16,149 cars sold. November took second place, with 15,954 cars sold. February, considered Vietnamese ‘New Year month’, recorded the year’s lowest sales – 7,314 cars.

Vietnam’s capital Hanoi represents a key growth market for auto companies. This year saw coveted automobile companies Bentley, Jaguar, Infiniti, and Mini launch their first dealerships in Hanoi. Other giants present in Vietnam include Audi, Lexus, Rolls-Royce and Porsche. Meanwhile, Mercedes-Benz Vietnam, which opened a manufacturing plant in Ho Chi Minh City in 1995, has seen stable growth throughout 2014 and sold 2,324 cars from January to November 2014. Vietnam has an estimated of two million cars and 37 million motorcycles on the road.

To learn more about import duties in Vietnam and how your business can capitalize on these developments, please email us at vietnam@dezshira.com

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