CAR IN VIETNAM: PROBLEMS, CAUSES AND SOLUTION 1

"Government intervention" in the cars trade in Vietnam.

Lê Diệu Linh

Student ID: GBH211214 _ Class: GBH1113

University of Greenwich (Vietnam)

CAR IN VIETNAM: PROBLEMS, CAUSES AND SOLUTION 2

Abstract

The car business has long been a hot issue across the world due to its significant effect on other sectors. As a

result, the issue of car trade in Vietnam is constantly centered on government action. Based on a number of

published research publications, this study analyzes the problem of excessive automobile pricing in Vietnam.

The report addresses current issues in the Vietnamese car product trade based on a report by Kobayashi Hideo

(2017). Furthermore, the reason for the high price of automobiles is cited as high tax expenditures and other

expenses, which are also included in the analyses of Nguyen Thi Thu Trang (2022) and Vietnamnet (2020).

Aside from the existing circumstances and causes, the measures being implemented by the Government of

Vietnam for the dilemma of high automobile costs are extremely practicable, as explained in a study piece by

Viet Nam News (2023). This significantly helps the situation. However, the government's measures still have

some minor drawbacks, such as a lack of justice in importing whole automobiles with imported spare parts. As

a result, the Vietnamese government, in collaboration with the ministries, must do more to address this issue.

Keywords: Government intervention, Car trade, Vietnam, Tax.

CAR IN VIETNAM: PROBLEMS, CAUSES AND SOLUTION 3

Table of Contents
1. Introduction................................................................................................................................................. 4
2. Rationale of research .................................................................................................................................. 4
3. Critical analysis ........................................................................................................................................... 4
3.1. Current problems ................................................................................................................................ 4
3.2. Possible causes ..................................................................................................................................... 5
3.3. Contemporary solution ....................................................................................................................... 6
4. Evaluation .................................................................................................................................................... 6
5. Conclusion ................................................................................................................................................... 7
References ........................................................................................................................................................... 8
CAR IN VIETNAM: PROBLEMS, CAUSES AND SOLUTION 4

1. Introduction

The car industry has long been one of the most significant industries in the globe. In Vietnam, the

government is always noticed of the issue of the car trade and intervenes in any form it can. According to

Das (2018), car costs in Vietnam are substantially higher than in other nations across the world. In particular,

Car prices in Vietnam are twice as costly as in Thailand and Indonesia; the disparity is even greater than

major auto-producing countries such as the United States and Japan (Tuoi tre News, 2023). This research is

broken into four main parts. First, describe the current problems of car products in Vietnam. The second

step is to explain the possible causes of the situation exists. Next is the current solution the government has

been taking to reduce this situation. Finally, evaluate the advantages and disadvantages of the government's

solutions. In my opinion, the challenges that cause high car prices in Vietnam are low efficiency rules and

excessive taxes when purchasing cars. As a result, the government must take more serious measures to

alleviate the situation.

2. Rationale of research

This research is significant because it covers current concerns in Vietnam, particularly those relating

to the car trade. Furthermore, it analyzes government interference and suggests remedies to this problem.

3. Critical analysis

3.1. Current problems

According to the Vietnam Automobile Manufacturers Association (VAMA), VAMA member unit

sales in October 2022 totaled 36,560 cars of all sorts, a 9.3% increase over the previous month and a 22.7%

increase over the same time in 2021 (Tran, Hoang and Nguyen, 2020). The aforementioned growth figures

indicate that the Vietnamese car market is approaching a time of high consumption. Aside from the benefits,

the Vietnamese car industry nevertheless confronts certain obstacles. Despite recent progress, Vietnam's

automobile industry continues to grow slowly in terms of both quantity and quality when compared to other

countries in the region. In the automotive sector, for example, the number of Vietnamese suppliers is still

fairly small as compared to Thailand. Thailand has more than 700 tier-1 suppliers, whereas Vietnam has
CAR IN VIETNAM: PROBLEMS, CAUSES AND SOLUTION 5

fewer than 100; Thailand has over 1,700 tier 2 and 3 suppliers, while Vietnam has fewer than 150 (Das,

2018). Furthermore, modern the car parts and components are primarily imported from nations with

significant auto industry growth, such as the United States and Japan. According to several industry experts,

these factors have a direct influence on automobile costs.

3.2. Possible causes

The issues of car prices are much higher than in many other nations due to high tax charges in Vietnam.

Cars imported into Vietnam are subject to the "tax on top of tax" concept, which implies that a new tax is

computed based on the car price plus previous taxes (Vietnamnet, 2020). In addition, in Vietnam,

automobiles are subject to three common taxes: import tax, excise tax, and value added tax. According to

Tu (2023), car items imported into Vietnam from ASEAN nations have no import duty, however imports

from Southeast Asian countries must pay up to 70%. Similarly, in Vietnam, automobiles with less than nine

seats frequently face excise taxes ranging from 40 to 150% (Nguyen, 2022). In Vietnam, the value-added

tax on vehicles is now 10% of the total product price after excise tax (Tu, 2023). Thus, the car industry

businesses on the Vietnamese market must pay all import taxes upon customs clearance, excise tax upon

sale and compute value-added tax for each product. High taxes, along with the tax-on-tax-on concept, raise

the product price several times over the price listed in the nation of manufacturing.

The expenditures that buyers must pay to own and utilize a car are the second cause influencing

automobile prices in the Vietnamese market. These expenses are separated into two categories: distribution

fees and costs that users must actively pay to get the wheelchair rolling (Nguyen, 2022). In the redistribution

fee included other small costs like as domestic shipment charges, warehousing costs, or warranty and risk

protections. Simultaneously, automobile buyers must pay the "floating" costs paid to roll the vehicle, which

are also described as car maintenance expenses. Furthermore, in order to possess an automobile, the user

must have the necessary documents, such as a driver's license, a license plate, and so on. Such documents

must also pay a relative cost.

CAR IN VIETNAM: PROBLEMS, CAUSES AND SOLUTION 6

3.3. Contemporary solution

Because of the causes stated above, the government has proposed practical ways to reduce the cost of

automobiles in the Vietnamese market. The Vietnamese government has encouraged enterprises capable of

mass-producing automobiles. The government has prioritized advantageous policies for firms producing

priority automobiles on a large scale of over 50,000 vehicles per year, as well as projects manufacturing

engine components, gearboxes, and transmission assemblies (VSI.GOV.VN, 2022). Furthermore, the

government has implemented a distinct excise tax rate for automobiles with a high localization rate (may

not impose excise tax on domestically created value). The proof is that the government has demanded a

50% drop in registration costs for domestic cars (Viet Nam News, 2023).

4. Evaluation

The measures implemented by the Vietnamese government have greatly improved the country's

automobile price condition. Preferential policies are supported by the government in order to retain and

expand Vietnam's car industry. Typically, Vietnam will produce 439,600 automobiles in total in 2022, an

increase of 14.9% over the same time in the previous year (Van, 2020). Recently, the VinFast event officially

started exporting 999 VF 8 units to the US market, which is the most fastidious market in the whole globe

(Vinfast, 2022). The fact that VinFast exports automobiles to the United States is incredibly significant,

producing a driving force for the local auto industry and helping to the realization of Vietnam's auto sector's

development strategy. Contributing especially to the realization of the dream of "Made in Vietnam"

automobiles and having the ability to write first on the international auto export map. Furthermore, the

government's tax cuts assist to ease the strain on businesses while also easing the burden on consumers. The

car price will not change as a result of the 50% registration fee decrease, but the cost for buyers to roll a car

will be cut from a few tens of millions to hundreds of millions of dong. The problem of this solution is that

only half of the registration cost is cut for domestically made and assembled automobiles, while the

registration fee reduction policy is still not applied to CBU imported cars. From there, there might be an

unfairness in automobile imports into Vietnam. However, in general, the measures implemented by the

government are aiding the vehicle industry in Vietnam.

CAR IN VIETNAM: PROBLEMS, CAUSES AND SOLUTION 7

In my opinion, in order for the price of cars in Vietnam to fall, the Vietnamese automobile market

must be vigorously promoted. Businesses must boost manufacturing of vehicle parts and components in

order for the automobile market to grow. In addition to the 50% decrease in registration fees, I urge that the

government should lower other forms of taxes such as import tax, excise tax, and value added tax.

5. Conclusion

In summary, the aforementioned research study discusses the present issues in the Vietnamese vehicle

trade, the causes and remedies proposed by the government, and evaluates the solution. The research

analyzed the tax position and the high expenses of automobile ownership, which led to the fact that car

prices in Vietnam are higher than in many other nations across the world. Furthermore, the research paper

discusses the solutions implemented by the government. Although government policies are helpful in

addressing the issue, there are some small drawbacks. Aside from the car trade, the Vietnamese government

needs to deal with a variety of other challenges, such as traffic accidents and theft. I believe that with the

Vietnamese government's attention, the country's problems would be best handled.

1290 words and 4 pages

CAR IN VIETNAM: PROBLEMS, CAUSES AND SOLUTION 8

References
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Available at: https://www.vietnam-briefing.com/news/overview-automobile-industry-vietnam.html/ (Accessed

12 April 2023).

Kobayashi, H. (2017) ‘Current Status and Traits of the Auto Parts Industry in Viet Nam’, Think-asia.org, 3

August [Online]. Available at: https://www.think-asia.org/handle/11540/10335 (Accessed 19 April 2023).

Nguyen, T. (2022) ‘Vietnam’s auto import tax policy in 2022’, LSX Lawfirm, 7 June [Online]. Available at:

https://lsxlawfirm.com/vietnams-auto-import-tax-

policy/#:~:text=Any%20product%20or%20commodity%20in,%2Dadded%20tax%20(VAT).&text=Accordin

g%20to%20Article%208%2C%20Law,10%25%20for%20all%20car%20models. (Accessed 19 April 2023).

Tran, N.H., Hoang, T.H. and Nguyen, T.T.H. (2020) ‘Environmental Management Accounting Perception and

Implementation in the Automobile Industry in Vietnam’, The Journal of Asian Finance, Economics and

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Tu, A. (2023) ‘Vietnam to lower car registration fee to boost sales’, VnExpress, 10 March [Online]. Available

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CAR IN VIETNAM: PROBLEMS, CAUSES AND SOLUTION 9

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