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Car prices to escalate in 2009   2008-12-15 - VietNamNet

Car prices have been decreasing sharply as automobile manufacturers have to offer attractive discounts to lure more clients. However, manufacturers have warned that prices will rise in 2009.

Consumption down, car prices up

Michael Pease, General Director of Ford Vietnam, said that the number of cars left unsold remains very big, while finance targets are still far from being reached. Big overstock has forced manufacturers to cut sale prices, which has been benefiting clients.

However, he has warned that car prices will increase significantly in the first quarter of 2009. The higher luxury tax, to be effective as of April 1, 2009, will make the price of 7-seater cars increase. Meanwhile, manufacturers will raise the sale prices in 2009 to cover the higher expenses they had to pay for the higher prices of import car parts and other expenses.
The automobile industry is expected to see consumption down by 20-25% in 2009 over 2008. Trucks are believed to bear the smallest impact, while individual vehicles will see consumption down by ¼ in comparison with 2008 (in 2008, it is estimated that 120,000 vehicles of different kinds were consumed, including 80,000 personal vehicles).
Murakami, General Director of Toyota Vietnam, also said that the luxury tax will lead to the fall of the automobile market. Car prices will increase, while consumption will significantly decrease, which will create a gloomy automobile market in which automobile manufacturers will meet big difficulties.
According to Huynh Du An, General Director of Euro Auto, the distributor of BMW in Vietnam, most automobile manufacturers plan to cut down productivity in 2009. Some manufacturers reportedly plan to cut down the output by 50%.
“The car prices will decrease only when the output increases, and lower output spells higher car prices,” An said.
How high will car prices be?
As of January 1, 2009, the ownership registration tax in Hanoi will be 12% instead of the currently applied 10%.
As such, those who purchase a $10,000 car will have to pay an additional $200 for ownership registration tax, while those, who purchase a $50,000 car will have to pay $6,000 in registration tax, an increase of $1,000 over the current tax rate.
HCM City is planning to impose the ownership registration tax of 15% in 2009.
As of April 1, 2009, the amended luxury tax will become effective, and will make 6-9 seat car prices see sharp increases, while less-than-five seat cars will bear less of an impact.
Analysts have estimated that the 6-9-seaters, with cylinder capacity of less than 2,000 cc, will see prices increase by 12% as the result of the luxury tax increase from 30% to 45%, while the prices of 2,000-3,000 cc cars will increase by 15%, and over 3,000 cc cars will see prices up by 23%.
The return of domestically assembled cars anticipated
As of January 1, 2009, Vietnam will open its retail market to foreigners, while automobile manufacturers have the right to import and distribute cars. A question has been raised about whether this will make the car market busier, which will help reduce car prices.
Ha Minh Tuan, General Director of Hyundai Motor Vietnam, said that the market in 2009 will see no big changes. The retail market opening will just bring more choices to customers
Michael Pease said that car imports brought big successes to importers in 2008, but the demand for these products has decreased as a result of the higher import tax. Besides, customers have found out that it is not easy to seek the support services.
He believes that 2009 will see the return of the domestically assembled cars to the market. Mr. Mukarami also said that Toyota will focus on assembling cars, and will only import cars when it finds the domestic demand high.

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