Vietnam Automobile Imports: A race ahead
Government regulations cause a headache for car importers
It was with high expectations that car makers and car dealers in Vietnam awaited a tariff cut from 30% to 0% on automobiles (completely built units) imported from ASEAN countries. A boom in the market was expected after January 1st, 2018, when the tariff reduction became effective. Major key players in the market such as Nikkei, Honda or Mitsubishi have announced price cuts in anticipation of 2018. These expectations were fueled by the hope that the Government would delay the implementation of Degree 116, which requires more stringent import procedures and quality checks than before.
The Government nevertheless introduced the decree at the same time as the tariff was removed and hence caused a major headache for importers as well as for consumers who were looking to purchase cars at reduced prices. The decree stipulates that importers need to provide registration and quality certificates issued by authorities from the countries of origin. But foreign authorities only provide these certificates for cars sold in their own countries, not for those that are exported.
As of now, Nikkei, Honda and Mitsubishi suspended all exports of their CBUS to Vietnam and not a single car unit was imported at the Ho Chi Minh city port during the month of January. Furthermore, smaller car dealers are expecting to go out of business following the enactment of the degree.
BDG Insight:
The enactment of decree 116 is a clear step of the Government to protecting the local automobile-making industry. Such moves are not uncommon – in 2018, the country introduced anti-dumping tariffs on certain metal products from China, for example. Similar steps can put the Government’s commitment to free trade agreements into question. Looking at the automobile industry, it is now unclear how well and how fast car importers will be able to deal with the new regulations – those able to comply first will have a great chance to profit from the current demand and supply shortage. One way for car producers to adapt to the new regulations is address the low localization rate in Vietnam’s car production and investing in developing local capacity.
Sources: 1, 2, 3