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Tax hikes to increase prices of lorries and buses
The price of buses and trucks are forecast to surge in the next few months in the wake of value added tax (VAT) hikes as of January 1, 2009, according to industry insiders.
Under the Law on Value Added Tax passed by the National Assembly in June, VAT on buses and trucks is expected to increase from the current 5 percent to 10 percent early next year.
Deputy director of the Xuan Kien Automobile Joint Stock Company (Vinaxuki), Bui Xuan Thanh, said as tax policies changed manufacturers would have to adjust prices accordingly.
Thanh estimated the price of trucks and buses would increase by at least VND4 million per unit, and up to VND50 million for more expensive models.
Thanh noted that the tax hike would only affect individuals as organisations were entitled to claim VAT tax rebates under current regulations.
According to industry insiders the upcoming tax hike would further dampen the automobile market, which has been stagnant recently due to tightening monetary policies.
Insiders said purchases of commercial vehicles, including trucks and buses, had significantly reduced as businesses felt the heat from strict credit controls. The Vietnam Automobile Manufacturers Association (VAMA) reported that its 16 member companies had sold only 7,809 vehicles in August, a 7.7 percent decrease over July figures and the lowest monthly sales so far this year.
General director of the Truong Hai Automobile Joint Stock Company, Tran Ba Duong, explained that a number of customers were interested in buying vehicles, but were worried about loan repayments due to the high interest rate of 21 percent. Potential customers were also concerned about high petrol prices, he added.
VAMA said many manufacturers, burdened with rising material costs were considering raising vehicle prices but were apprehensive further price hikes would put off customers leading to even lower sales.
The price of a vehicle has surged more than 20 percent due to price hikes in imported components, the US dollar gaining ground on the VND and high interest rate.
However, industry insiders said the truck and bus market was expected to heat up in the remaining months of the year as inflation was reined in and liquidity improved.
Freight and transport businesses also traditionally purchase more vehicles toward the end of the year.
To boost vehicle purchases some manufacturers have been introducing promotional packages to entice customers. Vinaxuki said it had decided to offer free registration to customers, saving customers 2 percent of the vehicle’s value.
VOV
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