The auto sector is still weary of the state’s fee proposals on the car industry development.
To tackle current traffic chaos and raise funds to enable transport infrastructure upgrades the Ministry of Transport (MoT) has presented three kinds of fees on personal vehicle users: a road maintenance fee, a fee on personal vehicle users, and a fee on cars entering cities’ downtown during rush hour.
Of the fees, the first would be collected from June 1, 2012, while for the two others – which were collectively called the ‘fee for limiting personal vehicle usage’ – the MoT had yet to propose the timing for them given the economy remains in a pickle, said MoT minister Dinh La Thang.
“The MoT has decided not to collect the fee for limiting personal vehicle usage this year, but this does not mean it will not eventually collect the fee. Hence, consumers still remain cautious upon arising costs when owning a car which hurts the car industry development,” said Vietnam Automobile Manufacturers Association (VAMA) chair Laurent Charpentier.
VAMA expected a downsized car market on the back of these fee proposals with sales in 2012 estimated at 135,000 units against 164,700 units it gave out in normal market conditions before the fees were proposed.
“Car sales volume in 2021 would amount to 400,000 units per annum if the market kept stable. If new fees came into force, sales volume may be halved to just 173,000 units by 2021,” said Charpentier.
Flat car sales will inevitably cast a dent on state budget collections.
While the proposed fees just contribute an estimated 1/20 of total budget collection from the auto sector, these fee proposals would have tremendous impacts on the general tax collection from the auto sector.
Last year’s Ministry of Finance budget collection report submitted to the National Assembly Standing Committee last week mirrored a big shortfall in tax payments from the auto sector on the back of sombre business.
Accordingly, budget shortfall against estimation from GM Vietnam in 2011 was VND507 billion ($24.1 million), from Ford Vietnam VND88 billion ($4.2 million), and from Toyota Vietnam and Honda Vietnam VND560 billion ($26.6 million), according to the report.
Explaining why contributions from car-makers to state coffers had experienced such a decline, Charpentier said only 138,000 car units were sold in 2011 against a forecast 170,000 units.
General director Tran Ba Duong at Truong Hai Auto Company, one of Vietnam’s leading car-makers, assumed these fee proposals have poured cold water on consumer plans to buy new cars.
“Car showrooms are full of the vehicles but customers there are sellers, not buyers,” said Duong.