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Fearful of bankruptcy, auto manufacturers insist on tax, fee reductions   2012-05-22 - VietNamNet

The car sales dropped dramatically in the first four months of the year, which, according to the Vietnam Automobile Manufacturers’ Association VAMA, should not be blamed on the economic downturn, but on the unreasonable policies.

High taxes, fees force sales down

VAMA has reported that the number of cars sold by its 18 members in the first four months of 2012 decreased sharply by 21,331 in comparison with the first four months of 2011.

Declining to give exact figures about the inventory volume, but Laurent Charpentier, Ford Vietnam’s General Director, who is also the Chair of VAMA, said the inventories are triple normal level.

Gauray Gupta, General Director of GM Vietnam, said automobile manufacturers need to set up production plan soon after considering the prediction about the car demand of the next year, so that they can sign contracts with car part suppliers 3-6 months in advance.

With the forecast car consumption of 140,000 cars in 2012 (10,000 cars a month), manufacturers ordered enough car part sets for the production right in late 2011.

However, the sales in the first four months of 2012 dropped dramatically by 42 percent in comparison with the first four months of the last year, while the low sales of cars in the whole year 2012 could be foreseeable, it is estimated that 20,000 cars and car part sets have been put in stock.

The VAMA’s Chair has affirmed that the car sales dropped sharply in the first four months of the year not because of the economic difficulties, thus forcing people to tighten their belt, but because of the policies.

In early 2012, the car ownership registration tax was raised to 15 percent in HCM City and to 20 percent in Hanoi, while the car plate granting fee was raised to 20 million dong in Hanoi.

Meanwhile, the Ministry of Transport has proposed to impose a new kind of fee aiming to restrict private vehicles, which would see the 20 percent year-on-year increase. The anticipated high costs of cars have prompted people to cancel the car purchase plan.

Mr Laurent Charpentier has noted that relevant ministries seem not to have the same voice on the automobile industry development strategy in Vietnam. While the Ministry of Industry and Trade builds up a strategy with an aim to attract investors to the manufacturing sector, the Ministries of Finance and Transport have been insisting on raising tax and fees.

Replying to the criticism that foreign automobile manufacturers broke their commitments to gradually increase the locally made content ratios in cars, he said that the manufacturers have been facing big difficulties when trying to increase the localization ratios.

He said only one enterprise in the south can provide batteries to manufacturers, but its production capacity is limited and it does not expand the production scale, because the current policies are not attractive to the enterprise.

Car limitation leads to sharp fall in budget collection

The manufacturer emphasized that in order to attract investors to Vietnam, the country needs to offer attractive and stable policies. Meanwhile, Vietnam’s policies remain unattractive and unstable.

A lot of new policies relating to the automobile industry have been set since the beginning of the year, which would have big impacts on the domestic market and production. After a lot of decisions to raise tax and fee, Hanoi authorities have decided to remove hundreds of car parking lots, and then suggested the policy on prohibiting cars to enter the inner city for five hours a day and five days a week.

VAMA has petitioned to competent agencies, suggesting three solutions: 1) canceling the plan to collect fee to restrict private vehicles. 2) Applying the single car ownership registration tax of 5 percent. 3) Reducing VAT.

VAMA has warned that if the government is still determined to impose taxes and fees, the state budget would see a loss of revenue of 12 billion dollars in the next eight years.

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