News Room - Business/Economics

Posted on 08 Aug 2008

Carmakers up prices to cover rising costs, higher taxes (Vietnam)

Toyota and Honda Vietnam have increased the retail price of their vehicles even though sales have slowed.

The carmakers say the price hikes are the result of higher import tariffs on auto parts and global increases in the cost of materials.

According to Toyota Vietnam, its locally-assembled models a€“ including the Hiace, Innova, Vios, Camry and Corolla a€“ will increase by US$100-$1,000 per unit.

Honda Vietnam, meanwhile, has raised its Civic series by VND35.3 million a€“VND39.3 million ($2,100-$2,300) per unit.

A Honda Civic 2.0 AT will now retail at about VND651 million ($39,250), up from VND611.7 million ($36,880).

Toyota said it had to boost car prices twice this year following the government increases in the tax on auto components in May and June.

Other input costs, including transport charges have also soared, the carmaker said.

Honda Vietnam Deputy General Director Gan Kok Seng said the price hike took into account global increases in materials and the high inflation within Vietnam.

Toyota and Hondaa€?s price increases surprised many dealers who said the hikes were difficult to understand because sales had been slow, partly because of sky-high lending interest rates.
 
Lending rates are now as high as 21 percent per year after the central bank this year raised the benchmark rate, which guides deposit and lending rates, to try to slow inflation.

Last month, the government raised car registration fees to 15 percent from 5 percent and it is also mulling further increases in import taxes.
 
The government needs to discourage automobile imports to help bring its trade deficit under control.

The government also wants to reduce the ever-worsening congestion on the nationa€?s roads.

Many car dealers blamed the governmenta€?s policies for their poor sales.

Some other carmakers said they will adjust the prices of their products when the local auto market is brighter.

Hoang Phi Dung, a representative from GM Daewoo, said his company had no plans to raise auto prices.

Dung said many Daewoo outlets had used their own money to pay deposits on cars several months ago when the market was good, hoping to earn extra profits from eager buyers who wanted immediate delivery.

But the market then turned, leaving the outlets with few customers and already-assembled cars.

The Ministry of Industry and Trade this week announced import licenses will be required for automobiles, motorbikes, some machines and some products made from steel and iron from August 22.

Auto dealers expect the local market will continue to fall this year.