Ministry mulls proposals to rev up auto industry

By Anh Minh   July 2, 2021 | 11:30 pm PT
Ministry mulls proposals to rev up auto industry
The VinFast production plant in northern Hai Phong City. Photo by VnExpress/Giang Huy.
Small market size and the price gap between locally produced and imported automobiles act as a drag on the automobile industry, the Ministry of Industry and Trade said.

Vietnam's automobile market is one third of Thailand's and a fourth of Indonesia's, which makes it hard for auto and component manufacturers to achieve economies of scale, and so most components have to be imported, and the resultant expenses of freight, warehousing and insurance push up production costs, it said.

The prices of locally produced automobiles have been 10-20 percent higher higher than those of imports from other ASEAN countries since tariffs were removed, it said.

In the past all imported automobiles were subject to a tax of 30 percent, and so local products were cheaper. But the tariff was abolished under an ASEAN free trade agreement in 2018.

The prices of automobiles imported from the European Union too will decrease gradually as part of Vietnam’s commitments under the EU-Vietnam Free Trade Agreement, which took effect in August 2020.

It will lower tariffs on vehicles imported from the EU by an average of 7 percent a year, bringing them to zero percent in 10 years.

To remove the two hurdles, the ministry is proposing continued preferential treatment in terms of import tax and special consumption tax.

It called for upgrading infrastructure, especially roads, in major cities such as Hanoi and HCMC.

It is considering measures against fraud and to control quality to ensure fair competition between local products and imports.

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