50% reduction of registration fees to rev up domestic car sales

VCN - Theapproval of slashing the registration feesby half for domestically-produced or assembled cars by the Government is considered a green-light in a move to stir up the car market that is struggling due to weak demand.
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Purchasing locally produced cars benefits customers 50% of registration fees by the end of 2020.

Accordingly, car buyers are expected to benefit from a corresponding discount depending on the price of the car and the locality.

Although cars at medium prices may not benefit from much discount, customers will benefit from a number of promotions and discounts from dealers which is considered an ideal time for those with demand for cars.

On May 17, the Office of the Government issued Notice No.182/TB-VPCP dated May 15, on the conclusion of Prime Minister Nguyen XuanPhuc after the Government's Permanent Meeting on the Government's Draft Resolution on maintaining control to remove difficulties for production and business in order to promote disbursement of public investment and ensure social welfare and security in response to the Covid-19 pandemic.

In particular, regarding automobile production, the Prime Minister has approved a plan to lower 50% of registration fees for domestically manufactured or assembled cars untilthe end of 2020 in order to boost domestic consumption.

The new offer is only applied for domestically assembled, CBU cars that are not eligible.

Local car makers benefit from this policy such as Truong Hai (Thaco), Thanh Cong (TC Motor), VinFast, Toyota, Honda, Ford, Mercedes. Accordingly, consumers will get a 50% reduction of registration fee when purchasing cars from brands owned by these enterprises.

In particular, customers will have to pay only 5-6% depending on provinces; meanwhile, those who choose CBU cars still have to pay up to 10 -12% of the car price.

50 reduction of registration fees to rev up domestic car sales
To cut auto registration by half causes no impact on the selling prices of local auto dealers because this is the revenue after selling the car.

Are selling prices attractive enough?

Under this fee cut, markets of “hot” models will become more exciting, so car buyers are expected to save from VND15-80 million. In the case of a Toyota Fortuner with a price tag of VND1.354billion, a customer would have to pay a registration fee of 10% x VND1.354 billion = VND135.4 million, but now the amount is cut by 50% to VND67.7 million.

Similarly, the registration fee for a Mercedes S450L at VND4,249 billionin Hanoi is 12% x VND4,249 billion = VND510 million. But now the decrease of 50% enables customers to save VND255 million.

Further analysis of market segments shows that commercial vehicles do not benefit much from this policy. For example, the registration feefor trucks will be 2% of the car selling price. Therefore, a car of VND1 billion normally has to pay a registration fee of VND40 million, now is reduced toVND20 million. Although the reduction is not much, it still partly supports buyers on demands.

In the segment of low-price hatchback cars, the decrease for domestic cars such as Hyundai Grand i10 or Kia Morning is not much bigger than imported ones such as Toyota Wigo,VinFastFadil, Honda Brio. However, in reality, this segment is currently rulled by two domestic models. Therefore, the reduction of registration fee of 50% will foster competition and enable to expand the market shares for the above-mentioned models. As a result, the price of cars of this segment will become more competitive in the future.

In the segment of sedan class, A or B, sales of the domestically assembled models such as Toyota Vios, Hyundai Accent, Kia Cerato, Mazda 3, Honda City are leading the market.

Meanwhile,imported models such as Mitsubishi Attrage and Mirage are not rivalling to compete with the above-mentioned ones because of more and more price favors for domestically assembled carsoffered. As a result, imported completely-built cars would lose advantage in the long run and domestically assembled ones would consolidate their overwhelming position. At the same time, this policy enables car buyers to get more access and the price of this segment is expected to remain lower in the future.

In the remaining car segments, models such as: Mazda CX5, Hyundai SantaDe, Ford Ecosport, Hyundai Kona take more favorable conditions from this preferential policy because they are under fierce competitions with Honda CRV models.

In the higher segment of SUV models, the fierce competition comes from domestic products such as Toyota Fortuner, Mazda CX8, VinFast LuxSA2.0 against imported products such as Ford Everest, Mitsubishi Pajero. Thanks to these incentives, the above domestically assembled vehicles of multi purposes will benefit greatly in comparison with competing importedmodels in the same segment.

Especially, incentives on tax and fee reduction are more evident in the market of luxury models which benefit the domestically produced and assembled ones the most. Typically, besides the popular ones like Mercedes Benz (Mercedes E 200, GLC 250, E300), Thaco Auto Company are assembling Peugeot (3008, 5008) models which can save customers from VND70-270 million depending on each model. Therefore, the incentives enable the luxury brands of Vietnam to enhance the competitive capacity, even surpasses other luxury brands of BMW, Lexus, Audi or Land Rover in Vietnam.

Along with a series of measure from agents and car dealers in recent years, such as: continuous discounts and promotions, interest rate reductions, cutting car prices to reduce losses, the decision to cut auto registration by half is the right methodto breakthe waiting mentality from buyers, encourage more direct support for the buyers in this period and contribute substantially to remove difficulties for domestic production.

By Nguyen Ha/Minh Phuong

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