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Four scenarios for import car market
How will the future of the import car market look? There are four scenarios for the market.
High tax and expensive cars
High tax and expensive cars are the things now being seen. In fact, import cars in Vietnam have always been several times more expensive than those in other countries in the world. The overly high prices of cars have been attributed to the high taxes on imports.
In fact, import cars became cheaper in the short period of between late 2007 and the two first months of 2008, when the Ministry of Finance three times slashed import taxes to put pressure on locally-made cars. During that time, import cars’ prices decreased by 10-15% compared to 2006.
However, since March 2007, as the country has been facing a lot of difficulties (high inflation and high trade deficit), the government has had to restrain luxury consumption by raising the import tax to 83% on complete built cars, paving the way for the first scenario to come back.
It is expected that the first scenario will last for one year more, until the difficulties of the national economy are settled. After 2009, the import tax on complete built cars will be cut gradually as per WTO commitments.
Cheap cars and high use fee
In the long term, the second scenario will certainly occur. The import tax on import cars will decrease under the tax cut roadmaps or following the tendency now occurring in most countries in the world.
However, when the import tax and car prices decrease, there will be more kinds of fees and higher fees. As such, though car prices will go down, car owners will still have to pay a lot for their cars, and even more than the current level as the result of the higher fees.
The scenario has been kicked off with the Ministry of Finance’s proposal to raise the ownership registration fee to 10-15% for less-than-9-seat cars.
Experts say that the government may consider applying other kinds of fee, like road fees and car parking fees. As for emissions, older cars may be assessed higher fees.
Import cars make room for locally-made products
This scenario anticipates the competition between locally-made cars and import cars.
For a long time more, cars will still be considered a luxury product, the consumption of which needs to be restricted. Especially, when traffic jams become more acute, policy makers will pay more attention to restraining car consumption.
While the national economy is still in big difficulties with low average income per capita, it is clearly not necessary to import too many cars which consume a lot of foreign currencies, while putting more difficulties on the development of the local automobile industry.
However, in fact, the scenario will only last for a limited time, because in the long term, a liberalised market is a must, and the fate of the locally-made cars will be mainly influenced by import car dealers.
The future belongs to official distributors
If the import car market develops well, analysts believe that official distributors will have more advantages than trade companies.
Official distributors act as the 1-class agents, and the representatives of the car manufacturers. Therefore, they will have to provide high-quality products with standard services.
Recently, while a lot of trade companies were coping with big difficulties, official distributors remained ‘safe’. When a lot of car salons could not sell cars due to the higher import tax and more expensive cars, official distributors like Euro Auto (BMW), HMV (Hyundai) did not see considerable decreases in sales.
Currently, the sale prices offered by trade companies are always lower than those offered by official distributors, which is considered a disadvantage for distributors in the short term. However, in the long term, they have more advantages in car care services and support from manufacturers.
VNN
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