“US-Vietnam Auto Import Tax Exemption: Will American Car Prices in Vietnam Plummet?”

Particularly, the information that American goods will be tax-exempt when entering Vietnam has led many to anticipate a considerable drop in prices of imported cars from the US in the coming time.

According to Trump, under the agreement, goods from Vietnam to the US will be subject to taxes of up to 20%, or even 40% if transshipped through a third country before reaching the US. Conversely, American goods, including automobiles, will enjoy a 0% tax rate when entering the Vietnamese market. Despite the lack of official confirmation from both governments, this statement has sparked intense discussions among consumers and car dealers.

Currently, completely built-up imported cars from the US to Vietnam are subject to import taxes ranging from 32% to 50%, according to Vietnam’s Government Decree 73, down from the previous 45% to 64%. In addition to import taxes, imported cars are also subject to special consumption tax (SCT) and value-added tax (VAT), following a “tax-on-tax” mechanism.

For instance, a Ford Explorer Limited edition, with a declared value of $50,000 (VND 1.31 billion), currently incurs a total tax amount of approximately $107,300 (VND 2.81 billion) to be imported into Vietnam, including an import tax of $16,000 (VND 419.59 million). If the import tax is reduced to 0%, the total cost would only be $82,500 (VND 2.16 billion), a difference of about $24,800 (VND 650.38 million), equivalent to a 23% decrease.
However, according to some experts, this reduction is unlikely to be fully reflected in retail prices, as besides the main taxes, car prices in Vietnam are influenced by various other factors such as transportation, storage, distribution, marketing, and business profits. Notably, logistics costs from the US to Vietnam can be significant, amounting to tens of thousands of dollars per car if imported individually through transshipment ports like Hong Kong or Singapore. In reality, while a 0% import tax will have an impact, it may not be as substantial as many expect. A more realistic expectation would be a price reduction of around 10% from the current levels.

Aside from costs, another barrier that makes it challenging to significantly lower prices for American cars is the product positioning strategy. For instance, the Ford Explorer and Ford Everest are from the same manufacturer but are imported from the US and Thailand, respectively, and belong to different segments. However, the price difference between them needs to be maintained at a reasonable level to avoid internal competition. Deep discounts on the Explorer could narrow this gap, complicating marketing and product segmentation strategies.

For luxury vehicles like the BMW X7 or Mercedes-Benz GLE, GLS, the impact of tax reductions may be more apparent due to higher tax rates and vehicle values. Nevertheless, some experts argue that this segment accounts for a tiny market share in Vietnam, catering to a minuscule fraction of the population. Hence, their influence on the overall market is negligible.

Many anticipate that the 0% tax rate will create opportunities to introduce more American car models to Vietnam. However, in reality, bringing purely American cars to the Vietnamese market requires automakers to carefully consider technical standards, consumer habits, and after-sales service. Best-selling models in the Asia-Pacific region, such as the Toyota Fortuner and Ford Everest, are not available in the US market. Conversely, “American-standard” vehicles may not be optimally designed for Southeast Asian conditions, including air conditioning systems, chassis, ground clearance, and emission standards. Therefore, to expand their product portfolios, automakers would need to establish dedicated production lines or versions suitable for this market, which is costly and challenging to implement.

In conclusion, while the elimination of import taxes on automobiles from the US, if officially enacted, will bring certain benefits, it is not the sole determining factor in significantly lowering prices for imported American cars in Vietnam.

Based on practical analyses, consumers can expect more reasonable prices but should remain cautious and not anticipate drastic reductions solely due to this single tax policy.

TH (Tuoitrethudo)