ACFTA hurting domestic automobile manufacturers

Friday, Mar 13, 2015 18:16

A corner of Thaco automobile manufacturing workshop. The firm leads sales with 2,965 units in February. — Photo
HA NOI (Buz Hub) — The Vietnam Association of Mechanical Industry (VAMI) has requested the Prime Minister and the Ministry of Finance to adjust the import tax imposed on complete built units (CBU) trucks.

This has been requested so the revised tax is more in keeping with tax levied on trucks, which are locally-assembled with imported parts that are completed knocked down (CKD).

The proposal was made after VAMI members evaluated the import tax imposed on CBU trucks and the current tariff regulated under the finance ministry's circular, which is an implementation of the ASEAN–China Free Trade Agreement (ACFTA) for the 2015 to 2018 period.

VAMI said the ministry had allowed a number of imported CBU trucks the kind of preferential tax rate, which is unfair for domestic manufacturers who have been producing and assembling trucks with CKD parts.

It added that when importing CKD parts, besides import tax, domestic firms are also burdened with many other costs, such as investment capital plugged into production and assembly lines, and costs of management and training workers.

In particular, the association's members have admitted that the price of importing a set of CKD parts is higher than that of a CBU truck because of the stringent conditions imposed by foreign suppliers. In addition, the number of locally-assembled trucks is not large, making the cost for locally-produced parts high.

VAMI pointed out that the aforementioned costs and import tax of CKD have led to local production costs for trucks increasing by 24 per cent, compared with the import of CBU parts. This has created a difference in prices between CKD and CBU imports in the domestic market.

Under the circular, the CBU import tax on a number of trucks is much lower than that of CKD parts–leading to unfair competition between auto businesses and auto manufacturers, who assemble trucks with CKD parts.

Deputy Chairman of VAMI, Dao Phan Long, told that for the sake of profit, firms will have to switch to imports of CBU in the future.

"The country's truck engineering and assembling industry will be weakened, at the same time, the State budget's tax collection will also be reduced," said Long.

In the domestic market, the truck is seen as a success of the Viet Nam automobile industry.

According to the Ministry of Industry and Trade, the tax rate for locally-produced parts of trucks made by Truong Hai Automobile Company (Thaco) is 30 per cent, while that of Xuan Kien Automobile Company is about 50 per cent.

The ministry also stated that it sees high potential for development in the segments of locally-assembled trucks and buses. However, with the tariff of CBU trucks imported from China, the domestic automobile assemblers' market share will be strongly affected.

Auto sales fall in February

Automobile sales reached 12,329 units in February, reflecting a 38 per cent drop from January, reported the Vietnam Automobile Manufacturers' Association (VAMA).

Despite the plunge, the figure still represented an annual leap of 69 per cent.

More than 7,900 of the cars sold were assembled in Viet Nam, down 41 per cent, while another 4,400 were foreign imports, down 32 per cent, VAMA noted.

In February, Thaco led sales with 2,965 units, followed by Toyota Motor Vietnam (2,868 units), Ford Vietnam (925 units), Honda Vietnam (505 units), and GM Vietnam (419 units).

Automobile sales during the first two months of this year soared 76 per cent from the same period in 2014. The sales of domestically assembled and imported units shot up 73 per cent and 111 per cent annually, respectively. — VNS

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