Vietnam auto market to move slowly, unsurely

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Workers at the Ford Vietnam factory in Hai Duong Province

The automobile market is set to grow this year, but it continues to be hobbled by inadequate policy support, industry insiders say.

The Vietnam Automobile Manufacturers' Association (VAMA) estimates in a recent report that sales would go up 8 percent over 2012 to 100,000 units this year, including 85,000 vehicles made locally.

VAMA chairman Laurent Charpentier said sales would not rebound to the 2011 level of 165,000 in the next year or two.

There would be a lot of challenges and carmakers would have to work hard to boost sales amidst the slow economic recovery and tax and fee constrictions, he said. 

The government has set a GDP growth target of 5.5 percent for this year following 5.03 percent growth in 2012, the slowest pace in 13 years.

Nguyen Mai, president of the Vietnam's Association of Foreign Invested Enterprises, said that while the government has always maintained its support for developing the local automobile industry, unstable and at times contradictory policies have discouraged investors.

Policies relating to the industry have been changed dozens of times in the past decade. Industry insiders said in fact there have been instances of three or four policy changes in a single year, destabilizing the market and weakening customer confidence.

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Though the government has taken measures to address carmakers' difficulties, they are not enough to spur demand, Charpentier said. Taxes and fees remain high compared to other countries even after the latest reductions, he said.

He was referring to the cuts in registration fees from 15-20 percent to 10-15 percent and in renewal fees from 12 percent to 2 percent.

However, an automobile still attracts five kinds of taxes and nine different fees, including value added tax, special consumption tax, and registration fees, which make it much more expensive than in other countries.

This is a major reason for poor sales, company representatives say.

Gaurav Gupta, managing director of General Motors Vietnam, said he saw a positive sign for the market this year in the finance ministry's decision not to approve a proposal by the transport ministry to impose an additional tax to limit personal vehicles.

However, he said, since the market had seen a sharp decline last year, and it would take more drastic measures to support local car makers who saw sales drop by a third from 2011 to 93,000 units.

Gupta said another factor hindering the market is the lack of a developed supporting industry.

To address these issues, he wanted the government to adopt long-term policies instead of the current short-term ones, draft an overall auto industry development plan for five to 10 years with targets set for the industry, including tax collection and job generation.

Two years ago, the industry had projected that sales would reach 450,000 units by 2020.

Charpentier said that due to the ever-changing policies, the forecast has to be scaled back to 300,000. Many manufacturers have had to change their business plans as a result, he said.

Yoshihisa Maruta, general director of Toyota Vietnam, said carmakers expand production only when a market develops.

This depends on tax policies, which need to be stable, he added.

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