FTAs posing challenges to Vietnam’s automotive industry
Vietnam has made efforts to build a domestic automobile industry, replace imports, and eventually become an auto exporter.
However, the young industry faces many challenges, especially in implementing free-trade agreements (FTAs), according to the editor-in-chief of Customs Newspaper Vu Thi Anh Hong.
Hong was speaking during a forum to discuss how Vietnam’s automobile industry is developing in light of FTAs.
The government has issued various tax and fee incentives to support the development of a domestic car industry.
These include 0% preferential import taxes on components imported for domestic automobile production and assembly (2018-2027), tax incentives for the automobile support industry (2020-2024) to ensure the supply of components and reduced special consumption tax rates for battery-powered vehicles compared with petrol/diesel vehicles.
They also include extended deadlines for paying special consumption tax on domestically produced/assembled cars until the end of 2023, 50% reduction in vehicle registration fees for domestically produced/assembled cars (2020-2023, with consideration for 2024) and other incentives on corporate income taxes and land use for the automobile industry.
The government policies aimed to promote the growth and competitiveness of domestic automobile manufacturing and supporting industries.
Hong also highlighted the crucial role of customs in facilitating import and export activity, particularly in the automotive industry. By modernising administrative procedures and offering tax incentives, customs aim to create a conducive environment for businesses involved in importing components, raw materials and supplies for automotive production.
She underscored the collaborative efforts between customs and businesses to foster a favourable environment for automotive production and trade, ultimately contributing to the growth and development of the industry.
According to participants, the development of the automobile industry is indeed multifaceted and requires a comprehensive approach beyond just tax incentives.
Experts point out various aspects that need attention, such as the availability of credit, technology levels, technical content, technology transfer, intellectual property costs, quality standards, and environmental sustainability.
Nguyen Anh Tuyet, a representative of the Vietnam Automobile Manufacturers’ Association, said the country has signed 17 FTAs, many of which include commitments related to completely built-up units (CBU) and roadmaps for cutting import tariffs on CBU to 0%.
She cited the Asean Trade in Goods Agreement, the UK-Vietnam FTA, the EU-Vietnam FTA (EVFTA), and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership as typical examples. “This is a huge opportunity for the auto market to diversify products and bring more choice to Vietnamese consumers,” Tuyet said.She went on to say that right after Vietnam committed to abolish import and export tariffs on goods from Asean countries, many domestically produced products are unable to compete with rivals from countries such as Thailand or Indonesia.
Under the EVFTA, the tariff on CBU vehicles imported from the European Union will decrease by about 6.4% annually over 10 years.
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