Tax policies encourage manufacturers to make small, low cost cars

General Motor Vietnam has launched Chevrolet Spark 1.0L model with a very competitive price of VND377 million.

Hyundai Thanh Cong has introduced Elantra which has the selling prices of VND699 million and VND756 million.

Prior to that, a Honda’s sales agent in HCM City introduced City model for Vietnam. Though the price of the car model has not been revealed, it is expected to be a small low cost car.

Vinaxuki is expected to launch VG, a small model for running in urban areas. The selling prices are between VND220 million and VND350 million for the 1.0L (VG 100), 1.3L (VG130) and 1.5L (VG 150) models.

Automobile manufacturers now tend to make small size and low cost cars in anticipation of the tax policy.

They have launched more small size models also because they hope the products, which have lower prices, would be more easily salable in the context of the low demand.

However, automobile manufacturers said they are still awaiting the new policies relating to the automobile industry development to decide what they need to do next.

If the draft plan on the automobile industry development by 2020, which suggests the 50 percent luxury tax and car ownership reduction for the models with the cylinder capacity of less than 2.0L, gets approval, the manufacturers would focus on making small size products.

Le Ngoc Duc, General Director of Hyundai Thanh Cong, said as the tax policies changed so regularly, automobile manufacturers could not set up their business plans.

Duc said if the government offers tax incentives for small size models and the policies are stable, automobile manufacturers would surely push up the assembling of the models in Vietnam. If so, this would help attract more manufacturers to Vietnam who would provide car parts to the assemblers.

General Director of General Motors Vietnam -- Gauray Gupta, has noted that the latest car ownership registration tax has helped warm up the car market, thus making the car sales increase.

He said automobile manufacturers are waiting to see the new points in the automobile industry development strategy. If the government of Vietnam offers more preferences to the domestic manufacturers as expected, they would make heavier investment to increase the locally made content ratios and launch more car models with reasonable prices.

According to Bui Ngoc Huyen, General Director of Vinaxuki, if the luxury tax and ownership registration tax decreases by 50 percent for less than 2.0L car models as predicted, buyers would be able to save $5,000-7,000 when buying a car.

This would help make cars cheaper and more affordable to people, which would help stimulate the demand.

Huyen said automobile manufacturers wish to see the new policies to be laid down as soon as possible, because they have no much more time left. They also expect bigger tax incentives for the enterprises which have high localization ratios or the enterprises which joint forces to make the strategic car models.

It is expected that the tax rates on over 2.0L car models would be raised to offset the decreases in the tax rates for less than 2.0L cars.