9-6-2023 (HANOI) In response to an economic slowdown that poses a threat to the demand for vehicles, the Vietnamese government is taking steps to reduce registration fees on domestically-produced cars by 50%, as reported by Vietnam News on Friday.
The proposed cut, slated to take effect for a six-month period starting in July, is expected to result in a reduction of up to 9 trillion Vietnamese dong (approximately $380 million) in government budget revenue, according to the Ministry of Finance.
The auto industry in Vietnam experienced a significant drop in production and sales in April compared to March, raising concerns about a potential shrinkage in the country’s automotive market, as noted by the Vietnam Automobile Manufacturers Association (VAMA).
VAMA member-manufacturers reported a 39% decline in retail sales of new vehicles, totaling 50,017 units, during the January-April period compared to the same period last year. Additionally, sales of imported cars decreased by 16% to 42,784 units.
The Ministry of Industry and Trade stated in a report that car manufacturers experienced a 19.3% decrease in production during the first four months of the year. Local businesses have also been grappling with high inventory levels.
While previous cuts in 2020 and 2022 successfully revived the auto market and led to a surge in car sales, the Ministry of Finance cautioned that the upcoming cut may not have the same level of impact on auto sales.
During the global supply chain disruptions caused by COVID-19 lockdowns in 2020, the automotive industry faced production reductions and delayed deliveries to consumers due to supply constraints. At the same time, consumer demand for vehicles outpaced supply.
However, current market conditions have made it challenging for car manufacturers to find buyers, as consumers delay purchases due to higher borrowing costs and a weakening economy, as indicated by auto dealers.
The proposed cut in registration fees could also have adverse implications for the country’s free trade commitments since it only applies to locally-produced vehicles. The Ministry of Finance acknowledged the concerns expressed by auto importers regarding perceived unfair treatment.
