The Tata Nano, the world's cheapest car, on display in Ho Chi Minh City. Photo credit: VnExpress
For years Vietnamese automakers have been holding their breath, waiting for 2018 when cars imported from Southeast Asian countries will become cheaper than their local counterparts, thanks to the abolition of import duties under a regional free-trade agreement.
With a recent increase in foreign investors' interest and a new trade deal with South Korea, the automakers find themselves already facing fierce competition which is likely to drive car prices sharply down.
A bombshell came early last week: India's largest automaker Tata Motors signed an agreement with TMT Motors Corporation, one of Vietnam’s top 10 manufacturers, for manufacturing the Nano, the world's cheapest car at US$2,500-5,000.
TMT Chairman Bui Van Huu said the car's price would almost double when imported to Vietnam due to taxes.
But many consider it a "good" price, given that it would be only slightly higher than an Italian SH motorbike.
Speaking to Thanh Nien, Nguyen Thanh Hai, director of transport company Phu Loi Hai Dang in the Mekong Delta Province of Soc Trang, said some automakers from Russia and Belarus are also coming to Vietnam soon.
Meanwhile, the prices of cars imported from South Korea, one of Vietnam's top suppliers, are expected to fall by at least 5-7 percent, thanks to the trade agreement signed on May 5.
Under the FTA, which took effect immediately, import duties on auto parts decreased to 0-5 percent from the current 14-20 percent.
Statistics from Vietnam Customs showed that 6,050 cars were brought from South Korea in Q1, accounting for 24 percent of the country's car imports.
With the recent events, there is no reason for car prices in Vietnam not to fall, Hai said.
Moreover, the price drops would be "remarkable" though special consumption tax and some relevant fees could be increased, he said.
Bui Ngoc Huyen, chairman of the Hanoi-based Xuan Kien auto company, said, "If the government is not going to issue preferential policies for the auto industry soon, it will be late.
"Local manufacturers cannot compete with the prices of imported cars and parts, which are getting cheaper and cheaper, even before 2018."
According to a recent survey by the Institute of Industrial Policy and Strategy under the Ministry of Industry and Trade, car prices in Vietnam are about VND50-300 million (US$2,300-13,800) more expensive than those in Indonesia and Thailand.
A Toyota Camry 2015, for instance, sells in Vietnam for more than $62,000, compared to $40,000 in Thailand.