The MoF added, the removal of such tax may potentially violate Vietnam’s commitment to the World Trade Organization (WTO). Moreover, the automobile supporting industry is already eligible for investment incentive.

In period 2018 – 2025, Vietnam will take steps to reduce import tariffs following the country’s commitment under the 10 free trade agreements (FTAs), informed the MoF. 

Substantially, the import tariffs for auto parts will be 0% as stipulated in the ASEAN trade in Goods Agreement (ATIGA) and the ASEAN – China Free Trade Area (ACFTA), leading to the most favored nation (MFN)’s tariffs of material inputs to be higher than that of final products.

Nevertheless, the decision on removing tax for a certain products lies on the Government’s authority, the MoF stressed. 

“VAMI needs to provide a list of imported materials and equipment, which are not produced domestically for making auto parts. Afterwards, the MoF will cooperate with related Ministries to propose a solution to the Government,” said the document.

The Ministry of Industry & Trade and Hyundai Thanh Cong previously also proposed to the MoF on exempting domestic products from excise tax, with a view to make the locally made cars affordable to the public. 

Last year, a total of 272,750 units were sold, down 10% on-year, informed Vietnam Automobile Manufacturers’ Association. The sales of passenger cars and commercial and special-use vehicles decreased by 15, 2, and 12%, respectively. 

The falling sales were attributed to consumers’ waiting for a decrease in automobile prices in early 2018 when the automobile import tariff will slip to 0% as the ATIGA took effect in the beginning of 2018.

Vietnam`s car market has been growing in March with 70% growth in sales, mainly thanks to Honda Vietnam`s 2,000 imported completely – built – units (CBUs) subject to 0% import tariffs.

Car sales in March are reported at 21,127 units, including 12,858 passenger cars, 6,949 commercial cars and 1,320 special-purpose cars, according to sales report of the Vietnam Automobile Manufacturers’ Association (VAMA).