Incentives for development of auto industry

VCN - To encourage domestic car production, the State has offered many preferential policies, notably policies on tax and registration fee reductions.
What's new in the financial autonomy of public non-business units? What's new in the financial autonomy of public non-business units?
Consider extending preferential tariff programme for automobile manufacturing domestically Consider extending preferential tariff programme for automobile manufacturing domestically
Auto industry steers strategy towards wider supply chains Auto industry steers strategy towards wider supply chains
The incentive program supports the development of domestic automobile production. Photo: Nguyen Ha
The incentive program supports the development of domestic automobile production. Photo: Nguyen Ha

Reduce taxes and fees

The year 2018 was the time to carry out commitments on reducing import tax on CBU cars in the ASEAN region to 0%, while domestic auto production was gloomy.

At that time, the Ministry of Industry and Trade reported localization rate of less than 9-seater cars is only 7-10% on average; new production stops at simple assembly and production line; car prices in Vietnam are two times higher than those of regional countries; and the quality of locally-assembled and manufactured cars is not as good as imported ones.

If the State does not develop incentive policies, local cars cannot compete with imported products.

Therefore, the Government issued Decree 125/2017 and Decree 57/2020 to run the tax incentive program for auto production and assembly. Accordingly, enterprises that meet the conditions set out in the incentive program are entitled to the preferential import tax rate of 0% for imported auto parts that cannot be produced domestically.

In addition, the Prime Minister signed Decree 70/ND-CP, effective from June 28 to December 31, 2020, to reduce 50% of the registration fees for domestically manufactured and assembled cars to encourage domestic car consumption and production. Accordingly, State revenue reduced by VND3,700 billion.

The result is not commensurate with State’s incentive policies

Although the Government issued preferential policies, the auto industry still has many limitations.

The Ministry of Finance said Vietnam's auto industry is currently only participating in the low segment of the auto value chain and greatly relies on the production of global automobile corporations. It has not yet mastered core technologies such as engines, control and motion systems.

The auto manufacturing and assembly industry has also not yet created the cooperation and specialization between enterprises in auto manufacturing and assembling and auto part production; and has not built a system of large suppliers of auto materials and auto parts.

Moreover, the auto manufacturing and assembly industry has not reached the goal of raising the localization rate, especially for less than 9-seater cars. In fact, the localization rate has grown mainly in the bus and truck lines.

In particular, despite the State's preferential policies, Vietnam’s selling price of cars is still higher than other regional countries. Therefore, the target of improving competitiveness and reducing imports has not been achieved as expected.

As of July 15, auto imports gained more than US$2 billion (up 107.7% over the same period last year).

The Ministry of Industry and Trade said the auto market size and the price difference between domestically produced cars and imported cars are the two biggest problems and challenges that Vietnam’s auto industry is facing.

Currently, Vietnam's auto market size is only a third of Thailand's and a quarter of Indonesia's.

This is a setback, so to participate in the incentive program, enterprises must satisfy the productivity condition. However, this condition was apparently not fulfilled.

Continue expecting incentive policies

The five-year incentive program is going to end and there are many shortcomings and inadequacies, the domestic auto industry is facing fierce competition from imported cars (from ASEAN members, CPTPP members and EVFTA members in next seven to ten years).

Many proposals have been made to support domestic auto production, mainly proposals on policy incentives.

The Ministry of Finance is consulting other ministries and sectors on expanding the tax incentive program after 2022.

Agreeing with the Ministry of Finance’s proposal, the Ministry of Industry and Trade also proposes revising regulations on special consumption tax for cars.

In an interview with reporters, a representative of the Department of Industry under the Ministry of Industry and Trade affirmed his support for the continuation of the tax incentive program.

The incentive program can be a lever to help domestic automobile enterprises overcome difficulties, improve competition with imported cars, and contribute to the development of the auto industry. The issuance of preferential policies is necessary.

However, after three years of implementing preferential policies, besides achievements, the auto industry still has many weaknesses and many problems.

Therefore, along with preferential policies, there must have reasonable conditions for the auto industry to achieve set goals.

By Nguyen Ha - Duc Quang - Huong Diu/ Huyen Trang

Related News

Without resolving three significant bottlenecks, real estate market

Without resolving three significant bottlenecks, real estate market's revival will face numerous challenges

VCN - Economic expert Vu Dinh Anh shares insights on the real estate market's recovery trajectory in 2024.
Wood processing enterprises strive to increase the proportion of individually designed goods

Wood processing enterprises strive to increase the proportion of individually designed goods

VCN - Many wood and furniture processing enterprises are promoting investment in design activities, helping to increase the proportion of individually designed products (ODM) in exports, thereby affirming the industry's capacity Vietnamese wood in segments with higher added value.
Considering long-term strategies for rice exports

Considering long-term strategies for rice exports

VCN - In 2023, Vietnam continues its standing as one of the top three global rice-exporting nations, constituting about 15% of the total global rice export volume. Despite Vietnamese rice having established a foothold in various global markets, competition with other contenders has never ceased.
Agricultural exports aim for a new record in 2024

Agricultural exports aim for a new record in 2024

VCN - Although it has only been the first 2 months of 2024, the prices of agricultural products on the world market have increased simultaneously. Vietnam's total agricultural export turnover also recorded growth in most products. These are all positive signals from the market, signaling a new record year for Vietnam's agricultural exports.

Latest News

ASEAN, RoK agree on transposition of AKFTA product specific rules

ASEAN, RoK agree on transposition of AKFTA product specific rules

ASEAN member states and the Republic of Korea (RoK) have reached a consensus on the transposition of ASEAN-RoK Free Trade Agreement (AKFTA) Product Specific Rules from the Harmonised System Codes HS 2017 to HS 2022.
Opportunities for digital technology businesses to go global

Opportunities for digital technology businesses to go global

Finding solutions and directions to promote and develop Vietnamese digital technology enterprises is an important task, which will promote the stability and sustainability of the country's economy, heard a recent conference.
Vietnam, China eye stronger border trade

Vietnam, China eye stronger border trade

Border provinces of Vietnam and China should continue close coordination and enhance trade promotion between the two sides, stressed the recent talks between the management boards of the economic zone of the northern province of Ha Giang and the Malypo border economic cooperation zone of China’s Yunnan province.
Improve competitiveness and sustainable development of the seafood industry

Improve competitiveness and sustainable development of the seafood industry

VCN - In early 2024, seafood exports have prospered. This is the driving force that helps seafood businesses hope for a stronger recovery this year. Ms. Nguyen Thi Thu Sac, Chairwoman of the Vietnam Association of Seafood Exporters and Producers (VASEP) shared with Customs Magazine.

More News

Business environment reform needs further promotion: expert

Business environment reform needs further promotion: expert

Resolution 02 issued by the Government creates pressure for the ministries, sectors and localities to make changes for the business community as well as the socio-economic development.
Singapore is the largest foreign investor in VN in Q1

Singapore is the largest foreign investor in VN in Q1

The disbursed FDI rose by 7.1 per cent in the first quarter to reach $4.63 billion, a signal that the disbursement will continue the positive trend, the agency said.
Thai Binh boosts investment, trade cooperation with Germany

Thai Binh boosts investment, trade cooperation with Germany

A delegation from the northern province of Thai Binh, led by Deputy Secretary of the provincial Party Committee Nguyen Khac Than, visited several localities and business organisations in Germany from March 25 to 27, in a bid to enhance trade cooperation with and attract direct investment from the European nation.
Lifting obstacles to develop industrial parks

Lifting obstacles to develop industrial parks

VCN - Attracting investment and developing industrial zones (IZs) and economic zones (EZs) is one of the important contents to implement the policy of developing a multi-component, open, attract investment and resources from all economic sectors to develop the country. In addition to the results achieved, there still limitations that need to be removed to draw investments to develop industrial parks and economic zones, including financial problems for industrial parks.
Unlock capital flows and create favorable conditions for investors

Unlock capital flows and create favorable conditions for investors

VCN - Talking with the press, Dr. Ngo Cong Thanh (Photo), Provisional Executive Committee member of the Vietnam Industrial Park Finance Association (VIPFA), said that it is necessary to open up capital flows and create conditions for investors to access key factors. Facilitate production and business factors and innovate investment promotion activities to more effectively develop industrial parks.
More than 300 businesses, manufacturers to attend VGMF 2024

More than 300 businesses, manufacturers to attend VGMF 2024

More than 300 domestic and foreign businesses and manufacturers will attend the Vietnam Global Manufacturing Forum 2024 (VGMF2024) to explore investment and business cooperation opportunities.
Connecting with FDI firms helps boost wood exports: insiders

Connecting with FDI firms helps boost wood exports: insiders

Strengthening linkages and cooperation between foreign-invested and domestic enterprises will contribute to promoting the sustainable development of the Vietnamese wood industry, according to insiders.
Doosan Vina exports nearly 2,000 tonnes of modules to US

Doosan Vina exports nearly 2,000 tonnes of modules to US

The Doosan Enerbility Vietnam (Doosan Vina) specialising in heavy industries announced on March 26 that it has just exported a batch of nine modules weighing nearly 2,000 tonnes to the Golden Triangle Polymers company in Texas, the US.
Take advantage of shrimp export opportunities right from early year months

Take advantage of shrimp export opportunities right from early year months

VCN - As the main export product of Vietnamese seafood, shrimp processing enterprises are taking advantage of export acceleration since the beginning of the year.
Read More

Your care

Latest Most read
ASEAN, RoK agree on transposition of AKFTA product specific rules

ASEAN, RoK agree on transposition of AKFTA product specific rules

ASEAN member states and the Republic of Korea (RoK) have reached a consensus on the transposition of ASEAN-RoK Free Trade Agreement (AKFTA) Product Specific Rules from the Harmonised System Codes HS 2017 to HS 2022.
Opportunities for digital technology businesses to go global

Opportunities for digital technology businesses to go global

Finding solutions and directions to promote and develop Vietnamese digital technology enterprises is an important task, which will promote the stability and sustainability of the country's economy, heard a recent conference.
Vietnam, China eye stronger border trade

Vietnam, China eye stronger border trade

Border provinces of Vietnam and China should continue close coordination and enhance trade promotion between the two sides, stressed the recent talks between the management boards of the economic zone of the northern province of Ha Giang and the Malypo border economic cooperation zone of China’s Yunnan province.
Improve competitiveness and sustainable development of the seafood industry

Improve competitiveness and sustainable development of the seafood industry

In early 2024, seafood exports have prospered. This is the driving force that helps seafood businesses hope for a stronger recovery this year.
Business environment reform needs further promotion: expert

Business environment reform needs further promotion: expert

Resolution 02 issued by the Government creates pressure for the ministries, sectors and localities to make changes for the business community as well as the socio-economic development.
Mobile Version