Vietnam aims for cheaper cars

Last month, VinFast announced that it will release new models. The cars are expected to be sold in 2020 with prices that are 20-30% cheaper than other brands. Truong Hai and Hyundai Thanh Cong also announced that once their major investments in automobile manufacturing are completed, they may lower car prices.

According to Le Ngoc Duc, director of Hyundai Thanh Cong, after their new factory with the capacity to produce 120,000 cars a year goes into operation, several models will have prices lowered to less than VND400m (USD17,200).

Component set value and brand value make car prices in Vietnam one of the highest in the world. There are reports that customers have been overcharged by car dealers if stocks ran low in Vietnam.

Bui Ngoc Huyen, head of Xuan Kien Automobile Company said only when local businesses were able to master the technology and make competitive products could local car prices decrease. Localisation would help reduce prices by at least 15-20%, he said.

The localisation rate at Hyundai Ninh Binh would reach 40% as the company was set to co-operate with both domestic and foreign businesses. Similarly, Truong Hai Auto also boosted co-operation with domestic and foreign companies to achieve a localisation rate of 40% in 2020.

VinFast set the goal to reach 60% of localisation rate in 2020 and be able to produce car engines in Vietnam.

Import taxes on auto spare parts and components may fall to zero for firms with total sales of 8,000 vehicles a year and where one model has sales of over 2,000 cars.

However, many automobile firms have expressed the desire for more support from the government and customers alike for locally-produced cars. Without supporting policies, the industry will face many difficulties.

The Ministry of Finance is considering a proposal to exempt the special consumption tax for locally-produced components. It may be added to be adjusted Special Consumption Tax Law and submitted to the National Assembly this year.

A car with 20% localisation rate is currently sold for VND 600m. With the new proposal, firms could slash prices by 15-12%.

If the rate is 40%, prices could fall 15-20% or 30% if the rate is 60%. If the proposal is approved, firms with high localisation rates could lower the prices further and become more competitive.