The Prime Minister has released a decree on preferential tariffs in many categories of goods within the framework of AIFTA (ASEAN-India free trade agreement), to be applied in 2016-2018. However, cars of all kinds are not found on the list of goods subject to the preferential tariffs.
This means that car imports from India will still bear the old import tariff of 70 percent, and that low-cost Indian models such as Tata Tiago and Suzuki Alto 800, Grand i10, Gran i20 or i20 Acitve will find it hard to squeeze into the Vietnamese market.
India is well known as the ‘paradise of low-cost cars’. Vietnamese, who now have to pay hundreds of millions of dong on average for one car, dream of possessing an Indian-made Tiago priced at just VND100 million, or a Suzuki Alto 800 priced at VND82 million only.
With prices of VND80-100 million, the Indian cars sell for prices similar to motorbikes Honda SH or Vespa, and even cheaper than an imported Spacy.
In fact, India has exported large quantities of cars into Vietnam. The number of under-9-seats CBU (complete built unit) imports from India in 2015 reached 25,000, accounting for 49 percent of the total imports of this kind. This represented a sharp increase of 89 percent compared with 2014.
With such a high growth rate, India has become the biggest supplier of under-9-seat cars to Vietnam.
The latest report of the General Department of Customs (GDC) showed that India only ranked third in the number of cars imported to Vietnam this year. However, the number of small cars is very high with 7,500 products imported.
The report also pointed out that the imports from India have decreased in value. It is estimated that every import from India is valued at US$5,000.
Nevertheless, the low-cost car models will still find it difficult to penetrate the Vietnamese market, because they will be no longer be cheap once they bear high taxes.
Besides the 70% import tariff, Indian cars will bear the luxury tax, 45 percent applied to cars with the cylinder capacity of 1.5L and smaller and 10 percent in value added tax.
Meanwhile, Indian cars cannot attract users in terms of design and poor interior equipment, while some car experts have doubts about their safety.