A file photo of an automobile show in Vietnam. Photo: Phong Tran
Sales of small cars are expected to increase sharply when a lower luxury tax rate comes into effect this July, local media reported, citing industry insiders.
They expected the prices of cars with engines smaller than 1.5 liters will drop by US$500-1,000 each when new tax amendments takes effect, cutting luxury tax for small cars from 45 percent to 40 percent, news website Saigon Times Online reported. The amendments were passed Wednesday.
This range of cars currently accounts for about half of Vietnam's auto market. They will become even cheaper after January 1, 2018 when the luxury tax rate is lowered further to 35 percent. Cars from other Southeast Asian countries will be imported with tariffs between zero and five percent starting 2018
Popular small cars such as Huyndai i10 and i20, Kia Morning, Toyota Vios, Ford Fiesta and Mazda2 are currently sold at VND300-700 million in Vietnam, the website reported.
Many businesses have already moved to capitalize on the new policy. Euro Auto, which imports and distributes BMW cars in Vietnam, for instance, has recently launched a new 1.5-liter seven-seater car in Vietnam, according to the website.
The market share of small cars will soon exceed 50 percent, industry insiders said.
On the other hand, luxury tax rates for cars with engines larger than three liters will rise sharply to 90-150 percents.
An industry insider was quoted as saying that the new tax rates can increase the prices of those multi-billion dong cars by as least 70 percent.
Starting July the tax rates on cars with engines ranging from 1.5 to 2.5 liters will remain at 45-50 percent, while those between 2.5-three liters will see a rise from 50 percent to 55 percent.
Vietnam's auto sales grew 55 percent to nearly 244,914 units last year. Local producers accounted for 70.6 percent of the total sales, while the rest were from imports, according to official figures.