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Luxury cars "sold out" in Vietnam ahead of 90 percent tax hike

By Bui Hong Nhung   June 16, 2016 | 04:08 pm GMT+7

Vietnam’s car market has seen growth in imported car sales contrary to a fall in the number of locally built-up products with changes to a special consumption tax about to kick in.

Data from the Vietnam Automobile Manufacturers' Association showed that in April, the number of imported cars jumped by 29 percent on-year to more than 6,000 units, while sales of locally built-up automobiles fell by 2.5 percent to 19,500 units.

The trend was repeated in May when imports of complete cars jumped by 11 percent against April to 6,900 units, in contrast to a two-percent decline of locally assembled automobiles at 19,117 units

Vietnamese car traders said the trend had been expected after the National Assembly approved changes to the special consumption tax law at the beginning of April. Accordingly, tax rates on small engine cars (under 1,500cc) will remain the same or fall by five percent, but tariffs for large engines (mostly above 3,000cc) will rise by up to 90 percent. These rates will go into effect on July 1.

The National Assembly's decision spurred customers to buy cars now to avoid the higher tax rates.

Traders said that many buyers want to purchase cars before July 1, but they can’t because supplies are very limited, especially for luxury cars with engines over 3,000cc. In addition, it takes about five to six months for dealers to order and transport cars from overseas, so they can’t give exact prices at present.

Pham Tuan from Dong Da District in Hanoi said that he has been searching for a Lexus 570 for a couple of days, but many dealers said they were out of stock.

Hong Ha from the capital's Ha Dong District said she suspected traders were holding on to stock to wait for the new tariffs to kick in so they could charge higher prices. She said she could still see many models on display in dealerships, but the salesmen claimed they had already been sold.

Car importers forecast that the market for luxury cars, which accounts for three percent of total car sales each year, will stay busy until the new tarriffs kick in.

“Higher tax rates will hinder the development of the automotive market and have a negative impact on many importers. This could take a chunk out of the state budget,” said Tran Tan Trung, an authorized dealer for Audi in Vietnam.

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