Imported cars market: "twisted" under the policy

Imported cars at Tan Vu port awaiting completion of import procedures. Photo by Thai Binh.

Welcoming Tet, waiting for the Decree

Contrary to the gloomy, declining atmosphere of previous months, the volume of completed imported cars increased rapidly in December 2017. According to the latest statistics of the General Department of Customs, in the first 15 days of December, the country imported 7,048 automobiles of all types, totaling more than 192 million USD. Of which, cars under 9 seats were 991 units, and trucks 4,850 units.

This is a sharp increase from the previous half of the previous month, even surpassing imports this month. By the end of November, there were only 2,931 imported cars (including 267 cars with less than 9 seats) and the whole country imported only 6,427 cars in November, totaling nearly 186 million USD.

Notably, the total number of cars under 9 seats imported in the first 15 days of December was higher than the total number of imported cars in the past several months, as in November there were only 592 cars; October was 878 vehicles; September was 908 cars.

Automobile Imports increased sharply in December

Imported automobiles plunged according to analysis, but then suddenly rebounded in the first 15 days of December. A specialist in this field said that the 1st January 2018, was a milestone, and was very important for automobile importers.

This is the time when regulations related to automobile imports under Decree 116 take effect and at the same time the import tax rate for complete cars from ASEAN to be at 0% (under the ASEAN Trade in Goods Agreement). And automobile importers are having a "headache" to calculate whether to bring cars before the 1st January 2018, to avoid "Decree 116 or wait for the benchmark date to enjoy 0% tax.

The increase in automobile imports as a consequence of the import tariffs reduction to 0% cars also, only affects shipments from countries in the region that qualify for preferential tariffs. For the imports outside the ASEAN region, businesses are worried that the "golden time" of car consumption is the occasion before Tet. Particularly since the context of importing cars market is showing signs of scarcity because some companies have not yet registered to wait for the milestone of 1st January 2018, to enjoy a preferential tax rate.

This is because many companies have to open car declarations in December to just to "avoid" regulations Decree 116, just to bring products on Tet holiday.

Vehicle waiting at the port for the tax reduction?

However, while many companies "hastily" imported cars in December, and with only a few days before milestone of 1st January 2018, there were still lots of imported cars waiting in the port.

According to a report by the Customs Newspaper, there are 3,000 cars; Toyota, Ford, Misubishi, Nissan, Lamborghini only waiting for import procedures in the Tan Vu port area (Hai Phong).

The highest number is Ford trucks, then Misubishi cars, then Honda etc., and many cars were docked for quite a few days but the companies had not completed the procedures for importing goods.

Automobile import in Hai Phong port is waiting ... Photo by Thai Binh

At the port of Hiep Phuoc (HCMC), in December 2017, the number of cars imported through this port increased sharply.There were more than 1,600 cars with less than 9 seats and pickup trucks that had arrived. 3 times higher than before.

The question is why these cars were not quickly processed by the company before the end of December, and bringing about scarce car consumption for the market. Some companies had to "break their promise" to their customers, by not delivering cars at the right time.

There are many reasons that some companies have not opened declarations, completed procedures to bring cars online for consumption. However, there are opinions that many of these cars are waiting for the tax reduction, because only in a few days the car import tax in the region will reduce from 30% to 0%, and car importers will enjoy a big price advantage.

Decree 116 and the problem of enterprises

So, is it difficult for importers to meet the requirements of Decree 116, because it doesn’t have a practical basis?

Regarding the implementation of Decree 116, the Vietnam Automobile Manufacturers Association (VAMA) has sent documents four times to the Government that importers are having difficulty implementing the provisions of the Decree. Most recently, on December 14th, VAMA proposed that the Government postpone the enforcement of regulations for the import of cars in Decree 116 for at least 6 months.

But it can be seen that auto import activity in December is mainly due to the specific calculations of each firm in the context of policy change and market volatility.

Imported cars at Sai Gon port. Picture by Thu Hoa

Many enterprises have met the requirements under Decree 116 and with import activities had no difficulties.

For example, Ford Vietnam has been licensed by the Ministry of Industry and Trade (No. 01/BCT-GPNK-OTO). According to the granted license, Ford Vietnam Company is allowed to import all kinds of cars including cars, passenger cars and trucks.

And for that matter, the importers of about 300 imported BMWs and Mini COOPERs (originating from the US, UK, Holland) are very interested in the market. Thaco now has all the documents required by the Decree to import 300 BMW and MINI cars to Vietnam from 1st January 2018. The first batch of cars have docked at VICT (Ho Chi Minh City) and are being processed.

Imported Mini Cooper consignment by Thaco NK has completed the procedures prescribed in Decree 116. Photo by Thu Hoa

It can be seen that the input orders and waiting by many enterprises, depends mainly on a company’s calculation based on market demand as well as incurred costs, and product costs. Some companies choose to import before January 1st, 2017 to "avoid" the provisions in Decree 116, to take advantage of the goods on consumption. It is clear that regulations in Decree 116 are more stringent and require higher quality of products, so importing cars will not be as easy as before.

Even with the early launch of products, and signed contracts with customers, there are car manufacturers in the area, eligible for 0% tax rate but still accept the declaration before 1st January 2018, taxable by 30% in order to timely deliver cars to customers, and to take advantage of increased market share in the context of other companies "stuck" in waiting for tax reduction. A survey showed that many companies have been busy storing cars before Tet. Revealed by a Ford Vietnam agent, the volume of Ford Ranger cars that have been imported can be sold in the first two months of 2018.

However, some companies want to enjoy the preferential tax rate of 0%, while wanting to comply with the strict regulations of Decree 116, they are holding their breath, waiting for the proposal to delay the implementation of Decree 116 accepted by the Government.

If the government accepts to delay the implementation time, these cars will be entitled to 0% import duty, and not subject to the strict provisions of Decree 116.