Higher import taxes cut into car market revenues

The auto market in Viet Nam is getting a swift kick in the rear following the impact of new and higher import taxes on cars.

The tax, which has gone up twice, from the initial 60% to the current 83%, has led to a frozen market, according to some auto dealers.

Only a few months ago, auto dealers hoped to gain bigger profits after the new tax went into effect and rushed to increase the number of contracts on imported cars.

But the market has turned out to be a dud.

"The market is frozen. It’s even icier than real estate," said Nguyen Van Thien, owner of a tourist car importer in HCM City.

Thien said buyers didn’t even appear after the company cut the price of each car by thousands of dollars.

Do Van Mau, the director of one of the largest car importers in HCM City, Than Chau Company, said the company sold only a few cars in the last month while five to seven cars were sold each day at the beginning of the year.

"We’ve never experienced such a hard time like this," said Mau. "No one will buy even when we offer prices lower than our initial investment. The slower we sell, the bigger losses we bear."

Businesses say the current situation has been caused by sky-high taxes and high bank interest rates. "With high interest rates, we can’t ask for loans," said Mau.

Buyers have also delayed their needs, after considering the added costs after sale.

"I have to rethink a car purchase because if it costs VND1 billion (US$60,600), I can gain much in interest a month by depositing the same amount at a bank," said Nguyen Thanh Trung, who lives in HCM City.

Slow sales and capital shortage have caused businesses to delay purchases because tax on imported cars must be paid immediately instead of 30 days after the sale as regulated previously.

Because of this new regulation, companies are struggling to pay all the taxes on their shipments of cars that have already arrived at Sai Gon Port.

To cut expense, importers are now cancelling contracts with their overseas partners on cars that are ready to be shipped. Cancellations of contracts entail a payment of a fine to the overseas contractors.

Mau said his company has had to pay in $5,000 in fines for each car imported from the US and $3,000 for each auto imported from Dubai. (VNS)