Why luxury products are so expensive in vietnam

With the Covid-19 impacts still looming on local economy, domestic oto prices have gone down but remained nearly double the prices of vehicles sold in xứ sở nụ cười thái lan and Indonesia, mainly due to lớn high fees and taxes for locally made cars.

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Rising domestic production capacity và existing government’s support policies to lớn cut fees và taxes for locally made cars are expected lớn be major factors dragging down car prices in Vietnam in the coming time.


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 Car production at Hyundai Thanh Cong manufacturing plant. Photo: Hoang Giang 

A representative from the Truong Hai auto Corporation (Thaco), one of Vietnam’s leading car manufacturers, expected the country’s participation in free trade agreements (FTAs) with major partners, including the EU, Japan, UK và South Korea, would help further abate costs for importing oto parts with import duty at 0%.

With the Covid-19 impacts still looming on local economy, domestic oto prices have gone down but remain nearly double the prices of vehicles sold in thailand and Indonesia, mainly due to high fees và taxes for locally made cars.

“High product unique and low base cost are essential for Vietnam cars to lớn compete with their foreign peers,” said tự động expert Nguyen Minh Dong, adding only a bigger market kích cỡ could attract more investors lớn come in to produce cars in the country and enhance localization rate.

Director of Hien Toyota noted while car manufacturers can streamline operation to drive down the production cost, taxes và fees are dependent on state policies.

“Lowering taxes & fees for cars will no doubt reduce prices & bring more benefits for customers,” she said.

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Booming market demand

A recent report from the SSI Securities Corporation suggested Vietnam’s income per capita is on the rise & set to grow at an average of 8-10% in the next decade.

“Compared khổng lồ regional countries, the current income per capita is fast approaching to lớn a point of bursting demand for cars,” asserted the SSI, adding cars would soon move from the luxury category with a passenger vehicle mật độ trùng lặp từ khóa of 34 per 1,000 lớn a more ordinary one with a density level comparable to lớn countries in the region.

The SSI also pointed to lớn a key factor that the domestic oto market is big enough for oto manufacturers lớn shift from importing cars to lớn assembling/manufacturing domestically.

At present, six major car manufacturers of Thaco, Huyndai, Toyota, Mitsubishi, Ford và Honda account for 90% of the market nói qua in Vietnam with a combined production capacity of 30,000-60,000 units per year, exceeding the break-even point for domestically-produced cars of 30,000-40,000 cars per year for an assembling plant, or 10,000-20,000 units for each oto model.

According to the SSI, domestic oto production capacity is increasing rapidly to meet customers demand, a key step to lớn lower oto prices.

With more cars manufacturing và assembling plants scheduled lớn complete in the 2022-23 period, the SSI expects a heating up car markets with steep discount policies would drive up domestic car demands.

Along with existing Vietnam’s tư vấn policies for the automobile industry, the National Assembly is currently discussing a possibility of reducing the excise tax rate for locally made cars, in which the specific reduced rate would be in line with the localization rate, aiming khổng lồ boost sales of affordable oto models.