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Domestic production has promoted expansion investment. Photo:N.H

At the Government’s regular meeting for November, on December 2 the press questioned the fact that many domestic auto makers face difficulties in tax and fees policies for CBU cars, domestically produced components, causing difficulties for competition and increasing the localisation rate.

According to Deputy Minister of Industry and Trade Do Thang Hai, car prices in Vietnam are higher than in other countries due to high domestic production costs and high fees and taxes.

For domestic auto manufacturers and assemblers, the reason for the higher prices is that market capacity is still small and the automobile industry has not met conditions for development. Moreover, this industry suffers from fierce competition with other competitors in the region and the world like China, South Korea, India, and ASEAN countries.

“Vietnam is a follower, Vietnam has a deep integration and signed fee trade agreements, so it has to implement many commitments; the intervention in policies to support automotive industry is not remarkable,” Hai said.

Another reason is that Vietnam does not have many regional and world-class enterprises in the auto industry. Moreover, FDI enterprises often use components manufactured by their country’s enterprises, therefore, there is a lack of participation and connection between FDI firms and the domestic sectors. Vietnam also lacks basic materials to produce and manufacture cars such as plastic and rubber so it has to import them at high prices, causing production costs to increase.

To support domestic automakers, Hai said that in the near future, ministries and sectors will provide solutions to maintain and create markets for the auto industry’s development. The Government will protect and develop the domestic auto market with technical barriers and ensure the fulfillment of international commitments.

The Government will encourage large enterprises to invest in developing the auto industry, focusing on developing supporting industries, building mechanisms and policies to attract investment from multinational corporations, targeting cars that have not yet been manufactured in the region to help Vietnam participate deeply in the value chain.

Regarding support for enterprises in the industry, Deputy Minister of Finance Vu Thi Mai said tha tenterprises enjoy incentives from Decree 125/2017/ND-CP amending Decree 122/2016/ND-CP on Export Tariff Schedule. The decree provides a five-year preferential rate with 0 percent import tax for components that cannot be produced domestically.

To further support these enterprises, Mai said the Ministry Ministry is amending and expects to submit to the Government a decree amending and supplementing Decree 125 in December in the direction of creating more favourable conditions and incentives for enterprises and industries supporting automotive manufacturing and assembly.

Accordingly, the decree proposes to stipulate a tax rate of 0 percent for domestic automobile parts, accessories and imported automobile parts and accessories.