Foreign carmakers see Vietnam 04 sales down 26 pct
HO CHI MINH CITY - Vietnam's foreign car makers, including major producers Toyota , Ford and GM Daewoo , have forecast a sales fall this year of as much as 25 percent to 32,000 units due to higher taxes.
"We are facing ... the risk to close our factories and lay off our workers," Nguyen Van Quy, deputy head of GM Daewoo's Vietnam unit, told government officials.
Quy was speaking on behalf of the 11 auto makers at a conference held on the sidelines of a 5-day car show in Ho Chi Minh City that began on Friday.
In January the communist government slapped a special consumption tax of up to 24 percent on locally assembled cars along with a 25 percent tariff on imported parts as it pressed makers for localisation in a commitment to stop protecting locally assembled vehicles.
The tax hikes, which have spurred wide protests from manufacturers and consumers, have driven car sales during the first seven months of this year down 15.1 percent on a year earlier to 15,836 units.
That figure is puny compared to neighbouring Thailand, which produced 533,000 vehicles in 2003, according to the Vietnam Automotive Manufacturers' Association, the grouping of 11 foreign assemblers who together employ over 25,000 workers and have invested $526 million in the sector since the late 1990s.
Fairer competition
Hanoi defended its tax policy as a way to create fairer competition for wholly imported cars.
"The development of our auto industry is our highest priority and we like to grant the best tax treatment to foreign car makers but international integration means that discrimination is not allowed," Quach Duc Phap, director of the finance ministry's tax policy department said at the conference.
At present foreign imported cars are subject to total taxes and import tariffs of 260 percent including an 80 percent rate for special consumption tax. Locally assembled cars will be subject to the same rate of special consumption tax by 2007, Phap said.
But the government showed signs of listening to the foreign assemblers complaints, with Phap saying he would forward their request for a lower sales tax to his ministry and that the current tax level on imported parts would be kept next year.
In the meantime, rows of parked motorcycles outside the exhibition hall near the airport of Vietnam's biggest city attested to the hunger for cars in a country where two-wheeled vehicles are still the kings of the road.
One of the browsers was Huy Bao, owner of an electronics shop. As he cruised the stands looking at the gleaming new cars and flashily dressed models showing off the vehicles' features, he said wistfully: "It will take me forever to own one of these cars."
Average annual incomes in the Southeast Asian country hover at $400, while a regular foreign sedan costs around $25,000. Currently Vietnam has just seven vehicles for every 1,000 people among its population of 81 million.
By Nguyen Nhat Lam - Reuters - September 03, 2004.
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