A growing middle-class population, rising disposable incomes and falling tariffs on cars imported from neighboring countries in Southeast Asia appear to be driving Vietnam’s car market.
The country’s car imports in the first half of January soared 50 percent from the same period last year to about 5,000 units worth $116 million, customs data shows.
This surge in imports is mainly due to a switch from motorbikes to cars. Around 75 percent of imported cars were classed as midsize sedans and the number of vehicles with nine seats and below nearly tripled from a year ago to more than 3,000 units.
Vietnam still relies heavily on imported automobiles to meet domestic demand despite a slight year-on-year decline in 2016 to 113,567 cars after it imported a record-breaking number of 125,534 units in 2015, according to customs statistics, equivalent to a 77 percent jump from 2014.
Since the Vietnamese government has targeted car manufacturing as a “spearhead industry”- one of the economy’s driving forces - car import taxes have remained high to shield domestic automobile producers from foreign rivals.
However, following the ASEAN Trade in Goods Agreement, Vietnam will cut tariffs incrementally over the next few years on imported cars from ASEAN countries. With the tariff scheduled to be fully removed by 2018, import turnover from ASEAN neighbors is expected to increase exponentially.
The tariff on cars from Thailand and Indonesia has been cut to 30 percent from 40 percent, effective at the start of this year, according to tax authorities. As a result, many imported cars will be 7 percent cheaper than previously.
New cars imported from Thailand dominate the market, with Mazda, Toyota and Ford among the most popular.
Sales of used cars are slowing, said the association of automobile manufacturers.
The number of imported new cars from ASEAN countries is on the rise due mainly to relaxed tax policies, including lower import tariffs, value added tax and special consumption tax, which will benefit import companies and authorized dealers, said a car dealer in Hanoi.