Vietnam Likely To Become An Import Market—Transfers to Cars from Motor Bikes

Ammar Master

The growing importance of Vietnam as the next big automotive market in Southeast Asia is undeniable. With an estimated 20 million bikes on the road, compared to a car population of 1 million vehicles, the potential is clear to see. Income levels are slowly rising–real GDP per capita (in 2005 US Dollar terms) has increased from US $468 in 2000 to US $834 in 2010, according to Oxford Economics, which works with J.D. Power Automotive Forecasting.

Manufacturers are hoping that the transition from two-wheelers to cars will happen sooner, rather than later. However, how the industry develops further and what direction it takes will pretty much depend on government policies on taxation, infrastructure development and investment promotion.

We think Vietnam will transform to an import vehicle market over the long term. We believe the country’s commitments towards the ASEAN Free Trade Area (AFTA) agreement to be the major driver behind this slowly shifting trend.

Vietnam to Cut Import Taxes on Vehicles

Under the deal, Vietnam is obliged to reduce import duties on completely built-up (CBU) vehicles from Southeast Asian countries to 0% by 2018. In accordance with this schedule, import duties on vehicles built in ASEAN countries are to come down from 83% to 70% this year. Apart from this, Vietnam is also cutting import taxes on vehicles with different engine sizes under its obligations to the World Trade Organization. Plus, import duties on 4-wheel-drive vehicles were reduced from 77% to 72% under the new tax rate. Continue reading ›