Automobile tariffs reduce, local companies are being threatened

Vietnam is being seen as an attractive market to foreign enterprises’ eyes. With the population of nearly 100 million people, increasing GDP per capita and the number of people in middle and upper strata, Vietnamese automobile market is experiencing an exponential growth of approximately 40 % increase. In addition, according to the ASEAN Free Trade Area (AFTA), the import tax on complete built-up units (CBU) reduced from 40% to 30%, which will eventually become 0% by 2018. Consequently, the imported autos from Thailand, Malaysia, and Indonesia are flocking to Vietnam, exerting tremendous pressure on local manufacturers.

In the first three months in 2017, the number of CBU witnessed an unprecedented rise to 25,536 autos in which the imported motor cars reached 16,310, up by 186% compared with this period in 2016. Furthermore, since 2017, Vietnam automobile market has undergone a race of sales in imported autos. The average price for one auto was 18,410 USD, a decrease of 6.674 USD compared with this period in 2016. This indicates that more and more cheap autos have imported to Vietnam. This trend is likely to continue till 2018 when the tax on CBU decreases to 0%. A remarkable decline in automobile price is also caused by the special consumption tax which decreases tax on autos with the capacity of lower than 2.0 liters from 45% to 40% in July 2017 and to 5% in the following years.

In the face of a continuous increase in the imported autos with a sharp decrease in price, local companies must face the risk of being unable to compete because the price for an assembled auto in Vietnam is 20% higher than that in other countries. Therefore, domestic companies are in a dilemma if they continue manufacturing while numerous autos with attractive prices imported from Thailand and Indonesia.