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Vietnam - Auto Sales Surged but High Taxes may Act as Speedbreaker
Oct 16, 2008

Vietnam’s auto industry registered 141% rise in sales in H1 2008, but the imposition of higher import taxes will bring down the sales in coming months.

According to Vietnam Automobile manufacturers’ Association (VAMA), an industry group, Vietnam’s auto sales rose 141% on yearly basis in the first half of 2008, as reported by
AFP.

VAMA said that its member companies sold 68,609 vehicles that include trucks, buses and cars in H1 2008 compared to 28,522 during H1 2007. Car sales alone jumped 60% year-on-year to 9,749 Units during June 2008. Besides, the car imports during the period grew 247% to $1.6 Billion and the volume of completely assembled vehicles jumped over 400% to 42,000 Units. The trade deficit of the country expanded to $14.8 Billion during January-June 2008.

The government’s decision to put hike in vehicle fee registration on hold was the main reason for robust growth in vehicle sales in Vietnam. When the government received bill for increasing vehicle registration fee, people rushed to auto shops for buying vehicles as they did not want to pay more in future.

Besides, the government adopted a well-planned strategy for increasing the automobile sales in the country, helping the industry to grow. Also, the government has strategically cut down vehicle imports in the country by levying more import taxes, leading to fall in sales of foreign vehicles. Low vehicle imports have made people to choose only from domestically-manufactured automobiles; as a result, their sales spurt in the last few months.

However, the government’s move to block foreign auto parts import in the country could pose a great challenge for the industry. In fact, this could severely impact the automobile sales as high import taxes raise the manufacturing cost of vehicles that might reduce vehicle purchase in the country.

According to a Research Analyst at
RNCOS, “The automobile industry in Vietnam is enjoying strong growth on favorable business conditions. The rise in import taxes added to the sales of domestic vehicles. However, the government’s decision to increase taxes on auto parts’ imports will have negative impact on sales in coming months. To offset the impact of high import taxes, the automobile manufacturers should introduce new and highly efficient models at affordable prices. This will also boost the overall automobile demand in the country.”

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