Prices of cars in Vietnam higher than Thailand due to taxes: industry ministry

According to the government regulations, cars are subject to a special consumption tax, value added tax, and import tax (except for domestically assembled vehicles).

Vehicles are also subject to various fees regarding registration, inspection, road maintenance, license plates, and compulsory civil liability insurance.

Another reason for the high prices is the low volume of domestically assembled cars, the ministry said, noting that automakers in Vietnam are producing far below their designed capacity.

By the end of 2022, the total production capacity of automobile plants in Vietnam was 755,000 vehicles a year, with foreign-invested ones accounting for 35% of that total. Businesses annually import about US$5 billion worth of components and spare parts for vehicle production, assembly and repair.

According to the ministry, the local automobile industry is now at the level of simple assembly with most of production lines consisting of four main stages, welding, painting, assembly and inspection.

Regarding vehicles made in Vietnam, the current local content rate is 60% for buses, and 34-40% for trucks, both meeting targets, but the rate for passenger cars is only 25%, lower than the target.

There are more than 40 automakers in Vietnam with a combined output of 65-70% of domestic demand for cars with less than 9 seats, according to the ministry.

The ministry said the local automobile industry currently faces a small market size, while there are many assemblers and many different car models, making it difficult for companies to invest in mass production.

Vietnam’s per capita GDP is not high enough for the majority of people to own a car. Per capita GDP should reach $4,000 a year to promote the growth of the automobile industry.

Other countries in the region such as Thailand and Indonesia have policies to attract large-scale automobile investment projects, putting competition pressure on the Vietnamese industry.

However, Vietnam is still a potential car consumption market in the region, with an average growth rate of 20-30% a year. Last year Vietnam overtook the Philippines to become the fourth largest vehicle market in Southeast Asia, after Thailand, Indonesia and Malaysia.