News Room - Business/Economics

Posted on 09 Apr 2009

Carmakers hold prices despite luxury tax hike (Vietnam)

        

Though the government has increased luxury tax on certain classes of cars with effect from Wednesday, most carmakers and importers are seemingly wary about hiking prices.

 

The tax on six- to nine-seat cars has gone up from 30 percent to 45 percent if their engine capacity is less than 2,000 cc, to 50 percent in case of 2,000-3,000 cc, and to 60 percent on larger cars.

 

Cars with five seats or less have seen smaller hikes and, in some cases, even tax cuts. The tax on vehicles above 3,000 cc has gone up from 50 percent to 60 percent.

 

Vehicles of 2,000 cc or less – like Hyundai Getz, Chevrolet Spark and Kia Morning – have seen rates lowered by 5 percent to 45 percent.

 

On cars with five seats or less and engine capacity of 2,000 to 3,000 cc the tax remains unchanged at 50 percent. Many popular models in Vietnam belong to this category, including Toyota Camry and Honda Civic.

 

Ha Minh Tuan, general director of Hyundai Motor Vietnam, said his company has no immediate plans to put up prices since it still has stocks imported before April 1.

 

Hyundai imports cars from its factories in other countries to sell in Vietnam.

 

Michael J. Pease, general director of Ford Vietnam, said in an interview to Thanh Nien Daily earlier this year that in Vietnam, more than 60 percent of a car price goes toward taxes.

 

As of Wednesday, Toyota Vietnam was the only company to announce price hikes because of the higher luxury tax rates.

 

The company plans to raise car prices by an average of 10 percent this month. The highest hike it will make is in the retail price of the Land Cruiser, which will go up by US$21,900. Prices of Toyota’s other three models – Camry, Innova and Fortuner – will go up by $100-4,000, with all the new prices taking effect on April 21.

 

The Japanese company, the world’s largest carmaker, topped sales in Vietnam in February with 1,646 units. Its Fortuner model sold 10 times more than targeted last month.

 

Market slowdown

 

Auto markets around the world are facing a dramatic slowdown. In Vietnam too, sales have plummeted since the second half of last year as high inflation, new vehicle taxes and the global economic slowdown took their toll.

 

According to the Vietnam Automobile Manufacturers’ Association (VAMA), sales of locally assembled automobiles rose to 6,671 units in February from a humble 3,852 in January.

 

But cumulative sales for the first two months were down by half from last year’s period, VAMA said. February sales were also down 25 percent year-on-year.

 

VAMA has not released figures for March yet but many Hanoi dealers reported better sales during the month.

 

Dealers in Ho Chi Minh City said the market remains dull, with buyers seemingly in no hurry to beat the price hike.

 

Many customers said they are still hesitant about buying cars in light of the economic slowdown, with or without the higher tax rates.

 

A car owner, who wished to remain unnamed, said he does not believe that car companies will end up cutting prices to boost sales.

 

The price of a Toyota Camry, for instance, has remained almost unchanged since 2000 and prices of locally assembled cars have even increased over the years, he said.

 

A prospective buyer said he has been waiting for car prices to go down for months, but in vain.

 

“I see no changes [in prices],” he said, noting that not many people can afford the current prices.

 

According to Ford Vietnam’s Pease, the Vietnam automotive market would have been tough in 2009 even without a global economic crisis.

 

“I do not expect that Vietnam will start to recover for at least another year,” he said in February.