From July 1, prices of autos with engine capacity of below 1,500 cubic centimeters are expected to fall by at least US$500 a unit while prices of cars with engines of over 2,000 cubic centimeters would soar due to special consumption tax change.
Auto traders projected the auto price changes after the National Assembly (NA) passed the revised law on amendments and supplements to some articles of the Law on Special Consumption Tax last week. The law will come into force on July 1 this year.
The special consumption tax for autos with no more than nine seats and engine capacity of 1,500 cubic centimeters or below will decline from 45% to 40% from July 1 and to 35% from early 2018.
With the tax reductions, prices of autos with engine capacity of 1,500 cubic centimeters or smaller are projected to slide by US$500 to US$1,000 per unit. These autos are priced from VND300 million (US$13,455) to over VND700 million (US$31,395) per unit in Vietnam, and used by young families and taxi firms.
Data showed the market share of cars with engine capacity of below 1,500 cubic centimeters has increased from 26.6% in 2011 to 36% in 2014 and 45-50% at present. Autos belonging to this segment include Hyundai i10 and i20, Kia Morning, Toyota Vios, Toyota Yaris, Honda City, Ford Fiesta, Ford EcoSport, Chevrolet Spark, Suzuki Swift and Mazda 2.
Car traders predicted the market segment will turn bustling with many new models launched after the tax reduction.
Euro Auto, the distributor and importer of luxurious BMW autos in Vietnam, has recently introduced seven-seat BMW 2 Series Gran Tourer at a price of VND1.5 billion (US$67,344) per unit.
Nguyen Dang Thao, general director of Euro Auto, said the price is calculated based on the special consumption tax cut of five percentage points.
The NA maintained the special consumption tax of 45% for cars with engine capacity of 1,500-2,000 cubic centimeters until end-2017 before going down to 40% from early 2018. Vehicles with engine capacity of 2,000-2,500 cubic centimeters will be subject to the existing tax of 50%.
However, the legislature approved adjusting up the special consumption tax for autos with engine capacity of 2,500- 3,000 cubic centimeters from 50% to 55% from July and to 60% from early 2018. Tax rates of 90-150% will be slapped on cars with engine capacity from 3,000 to over 6,000 cubic centimeters from July, far above the current 60%.
The special consumption tax of 100% was imposed on five-seat passenger autos from 1999 to 2003 in accordance with the Law on Special Consumption Tax issued on 1998.
The new special consumption tax adoption showed that the NA agreed with the Ministry of Industry and Trade’s proposal for tax sharp increases for luxurious autos and reduction for smaller cars.
Autos with engine capacity from 3,000 cubic centimeters only made up about 3% of the local auto market.
Traders forecast that the market share of luxurious cars will shrink after the high tax rates are applied. For example, prices of autos with engine capacity of over 6,000 cubic centimeters could rise by at least 70% compared to the current prices due to the tax.SGT