The number of made-in-India cars exported to Viet Nam has significantly increased due to the advantage of cheap prices. — Photo cafef.vn

HA NOI (Biz Hub) — The number of made-in-India cars exported to Viet Nam has significantly increased due to the advantage of cheap prices.

According to the latest statistics issued by the General Department of Vietnam Customs, India is the third largest exporter of cars to Viet Nam, following Thailand and South Korea, with an export of 11,103 units in the first nine months of this year at a total value of US$76.8 million.

In September, India shipped 1,756 units to Viet Nam, a year-on-year increase of 78 per cent.

Thailand continued at the top in both quantity and value. It exported 23,899 units to Viet Nam in the first nine months at a total value of nearly $440 million, 41 per cent and 59 per cent, respectively, higher than the same period last year.

Meanwhile, the import of cars from China and South Korea witnessed a decline in both quantity and value with 13,871 units at $230 million and 8,886 units at $342 million, respectively.

Each Indian car's average costs, insurance and freight (CIF) price of VND154 million ($6,891), the lowest compared with other imported cars into Viet Nam.

The average CIF prices of cars from Thailand, South Korea and China were $18,410, $16,581 and $38,455, respectively.

Indian cars exported to Viet Nam are mainly small sedans of the models Grand i10 and Suzuki Ertiga.

India is not a member of the group of countries that have trade agreements on automobiles with Viet Nam, therefore an import tax of some 68 per cent has to be paid, much higher than the rate of 40 per cent for ASEAN members.

However, Indian vehicles have low engine displacement, so they do not have to pay a very high Viet Nam special consumption tax.

According to the revised Law on Special Consumption Tax, which came into force on July 1, the tax for vehicles which have engine displacement below 1,500cc is reduced from 45 per cent to 40 per cent this year and will be 35 per cent by 2017. Vehicles with engine displacement from 1,500cc to 2,000cc are taxed at 40 per cent of the car value.

The cut in special consumption tax is seen to have created a significant advantage for the import of Indian small sedans.

According to importers, cars imported from India have an advantage on price in comparison with locally-assembled cars in the same segment. Psychologically, people still prefer imported cars rather than locally-assembled ones. In addition, small sedans from India are fuel saving because they are equipped with low displacement engines.

Although the average CIF price is some VND154 million each, after it is added with other taxes and fees, such as import tax, special consumption tax, registration fee and value-added tax, the price in the domestic market is still suitable for Vietnamese customers -- from VND350 to VND500 million.

Nguyen Tuan, director of Thien An Phuc Company Ltd, an auto importer, told VnEconomy that India was seen as the "capital' of low-price cars thanks to its preferential investment policy.

Several of the world's giant automakers have invested in India, where they can optimize expenses thanks to the cheap labour force, low fees and taxes. This is why their cars are more competitive than those of other countries.

However, Tuan said almost all small sedans imported from India followed the Euro 2 standard, a level of standards for vehicle emissions, which has been restricted by many developed countries.

Therefore, the automakers were exporting those vehicles to those markets which had a high demand such as Viet Nam.

"The Euro 4 standard will be officially put in use in Viet Nam by early 2017, therefore, there is a massive import of cars with Euro 2 standard into the country before the Euro 4 standard comes into force," Tuan said.

In particular, he said the strong growth of cars imported from India was due to the fact that there were a number of taxi firms newly-established in Viet Nam, which were expanding their network and buying new cars. — VNS