Statistics from the General Department of Vietnam Customs show that the foreign sector controls roughly 80% of the local car and automobile (excluding motorbike) retail market with a sales volume eclipsing all of Southeast Asia.
Auto distributors and original equipment manufacturers (OEMs) based out of Thailand hold the largest share of the retail market followed by the Republic of Korea (RoK) and China in descending order of magnitude.
Compared to Vietnam, Thailand’s success at attracting top brands the likes of Ford, Toyota, Honda and Nissan, is in large part attributable to the countries more favourable tax structure.
Taxes and fees account for up to 50% of the final sales price of a vehicle manufactured in Vietnam, a figure that is more than 20% higher than the comparable taxes and fees charged in Thailand.
Prior to the emergence of the ASEAN Economic community (AEC) the Vietnam government was able to regulate the local auto industry via the imposition of import tariffs and local taxes as appropriate.
However, with the arrival of the AEC at the beginning of 2016 and the elimination of import tariffs pursuant to the ASEAN Trade in Goods Agreement, Thai auto sales in Vietnam have shot up rapidly.
Under the agreement, the import tax on automobiles from Thailand and other ASEAN members – Myanmar, the Philippines, Malaysia, Singapore, Laos, Indonesia, Cambodia, Brunei and Vietnam – have dropped by 40-50% in 2016.
They will continue to fall by another 30% in 2017 and be eliminated entirely by the end of 2018.
Meanwhile, the Vietnam government has not concurrently reduced the taxes and fees on local manufacturing of autos and this explains, in large part, why vehicles produced in Thailand are less expensive.
Notably, Thailand also has more than 2,000 OEMs, which has aided the country’s rise to become the biggest hub for auto and part exports not only to Vietnam but the entire Southeast Asian region.
Without a doubt, say many leading experts, after 2018, the complete roll back of the import duty will put ownership of an automobile within reach of the majority of Vietnamese citizens.
This, they say, could lead to explosive sales growth and a myriad of adverse consequences for the nation.
It’s problematic because its puts excessive pressure on the public transport infrastructure, overburdens traffic systems and potentially threatens traffic congestion that would choke off commerce.
Not to mention the threat to public health brought about by pollution and auto accidents, they say, noting the elevated need for the government to advocate strongly for effective policies that reduce auto use throughout the nation.