The Ministry of Investment and Trade (MOIT) has announced that a special bidding session, held once a year, will be organized in May for the right to import used cars.
The news has caught attention from the public as this is believed to be a great opportunity for Vietnamese people to buy Rolls-Royce, Bentley, Cadilac, Jaguar, Lamborghini and Ferrari vehicles at reasonable prices.
As tax falls, more cars will arrive
Under the CPTPP trade agreement commitments, Vietnam offers preferential import tariffs to a certain number of used cars to be imported from CPTPP-member countries under a quota.
MOIT plans to organize the bidding session for the right to import used cars in May this year. Seventy-two used cars are allowed to be imported in 2021, including 36 cars with the cylinder capacity of over 3,000 cubic meters and 36 others with the cylinder capacity of 3,000 cubic meters or less.
The taxes on the used imports from CPTPP countries will be based on the preferential import tariff for 2019-2022 stipulated in the government Decree 57/2019, which will be mixed taxes, including percentage tax and fixed tax.The import tax rate for quota-based cars with 9 or fewer seats is 52.5 percent in 2021, while the fixed taxes are $7,500 for less than 2,500 cc cars and $11,250 for cars with cylinder capacity of 2,500 cc or higher. The tax rates are much lower than the rates for non-quota imports.
Car dealers estimate that a quota-based used car with cylinder capacity of 2,500 cc which has the declared price of $10,000 would have the pre-luxury tax cost price of $26,500 if counting the 52.5 percent and $11,250 taxes. Meanwhile, a non-quota used car of the same kind would have the pre-luxury tax cost price of $35,000-40,000 because of the high tariffs of 150 percent or 200 percent, depending on models, and the high fixed tax of $10,000.
In principle, the higher value the used imports are, the bigger the benefits will be. As Covid-19 has had an impact all over the world, many wealthy people have sold their luxury cars to tighten their purse strings. This is a great opportunity to bring luxury Rolls-Royce, Bentley, Cadilac, Jaguar, Lamborghini and Ferrari cars to Vietnam.
However, experts warned that it would be not easy for car dealers to make money. In principle, importers will have to attend bidding for the right to import cars. Meanwhile, car importing is a conditional business field implemented in accordance with Decree 116 released in 2017. All businesses have the right to auction for tariff quotas to import used cars, but only the businesses which have licenses for car import can import cars. Importers have to make commitments on maintenance services and recalls, if necessary.
With the requirements, the businesses which have licenses for importing cars and have maintenance facilities will have advantages in bidding, while ‘empty handed’ businesses will be at a disadvantage.
When winning bids, they may authorize the enterprises with licenses to import for them. But this won’t be easy, because the enterprises with licenses may charge very high fees.
Used cars are the cars registered for circulation in exporting countries before they arrive in Vietnam. Of the 11 CPTPP member countries, six countries use right-hand driving cars, including Japan, Australia, New Zealand, Malaysia, Brunei and Singapore, which don’t fit Vietnamese laws.
Therefore, Vietnamese businesses can only import quota-based left-hand driving cars from four CPTPP countries, namely Canada, Mexico, Chile and Peru.
It will not be easy to find used cars which meet the requirements. The target countries are in America, which is far from Vietnam with high transport cost. MOIT organized an auction for tariff quotas for used car imports on August 14, 2020. Only two businesses won the bid. King F&B Co Ltd won the bid to import 10 cars, while Long Bien Investment Trade won for five cars. Meanwhile, the quota for 2020 was 66 products. Many enterprises with car import licenses did not attend the bid.
Nguyen Tuan from Thien An Phuc commented that the bidding for tariff quotas to import used cars is not attractive to Vietnamese businesses without licenses. Even if they win the bids, they will find it difficult to import cars.
Tuan said even if the tax rates are lower in 2021 and the used car prices in the world decrease, the business is still unattractive because of the strict regulations.