Tax rises, auto market becomes chaotic

16:57' 28/04/2008 (GMT+7)
VietNamNet Bridge – State management agencies are resigning themselves to remaining powerless in the chaotic car market, where prices are escalating day by day as a result of the ever-changing tax policies.
Though car importers say that they still have some cars imported when the import tax rate was at 70%, car showrooms have all raised the sale prices. In some cases, sale prices are 7% higher than previously levels.
For example, a Kia Morning, which had the sale price of $19,000 when the tax rate was 70%, is now selling at $21,000. Meanwhile, with the new tax rate of 83%, the car should be sold at $20,000 only (+ $1,000). A Toyota Camry 2,4L, which should be sold at $58-59,000 with the new tax rate, is now selling at $60,000, or $1-2,000/unit higher than previously.
Hyundai Santa Fe model has seen the increase of $5,000/unit, and no car is still selling at levels calculated on the previous tax rate of 70%.
Sales agents all say that car prices keep rising due to the higher tax rate. Moreover, as car importers will not import cars anymore (the high taxes make imports unprofitable), import cars will be scarcer. That explains why many sales agents are not selling cars at this moment, intending to sell later when prices go up further.
As for locally assembled cars, no local manufacturer has officially announced price increases, but information has been leaked from their sales agents that sale prices will increase. A salesman at the Mercedes Benz An Du showroom said that Mercedes cars will be $1-3,000 more expensive as the car part import tax rates have been raised.
Meanwhile, salesmen at Honda My Dinh showroom say that the contracts on purchasing Civic cars include provisions which say that clients will have to pay more money if prices increase, VND5mil at maximum.
If clients want to get deliveries right now, they have either to buy Mercedes cars, or accept paying additional money.
A reader told VietNamNet that he has to pay $3,000 more to get a Toyota Innova. He said clients have become discouraged with the day-by-day price increases.
“The government is trying to force prices down in an attempt to curb inflation, while it closes its eyes to the car price increases,” the reader said.
The uncertainties of the car market are being attributed to the unsuitable tax policies followed by the Ministry of Finance.
The ministry has five times changed car import tax rates in the last 16 months, which has made tax policies unpredictable and caused difficulties for manufacturers and importers
The changing tax policies show that state management agencies do not have a long-term vision when making policies, while they just make decisions to deal with problems at different moments.
The Ministry of Finance has been criticised for creating a chaotic car market, where some subjects can get fat profit from clients.