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Tax changes rattle car sales
Vietnam’s new car sales have been rocked by three adjustments to auto fees and taxes over the last five months.
With each change, domestic car sales halved.
Car sales in Vietnam rose steadily last year. In December, the Vietnam Automobile Manufacturers Association (VAMA) announced it sold 9,293 vehicles in the month.
But sales fell by 58.5 percent to just 3,852 cars the following month, after registration fees across the country were doubled from 5 percent to 10 percent, effective from January this year.
However, in Hanoi the car registration fee was lifted to 12 percent.
With the average price of a new car in Vietnam now at around US$30,000, the increase in registration fees will cost each car buyer an extra $1,500.
In February, the government changed its luxury consumption tax rules. The change meant that from April this year, cars, considered a luxury item, were taxed at up to 25 percent instead of 10 percent, based on engine capacity and seats.
The change triggered a rush of car sales from consumers trying to avoid the higher tax rates.
In February car sale rose by 173 percent from the previous month, with 6,671 cars sold.
In March, car sales hit a record, with 11,316 cars sold, a 170 percent up from February.
In two months, cars models with six to nine seats, which attract one of the highest rates of tax, had the biggest jump in sales. Around 4,000 cars with six to nine seats were delivered to buyers in March alone.
The market volatility continued in April, when car sales fell 47 percent from the previous month.
Only 7,711 four-wheel vehicles were sold in April, after the luxury consumption tax came into effect.
The changes to the car tax policies have been blamed for the erratic car sales trends in Vietnam this year.
In the long term, the tax policies appear set to damage the development of Vietnam’s domestic car market.
For the past 10 years, the Vietnamese government has been trying to develop a domestic car manufacturing industry. There are still no Vietnamese carmakers but foreign auto giants, including Mercedes-Benz, Ford, Mitsubishi and Toyota, have assembly plants in the country.
Lao Dong, vietnews
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