 |
| Vietnam has concluded several free trade agreements (FTAs) and is committed to fulfilling its obligations in the automobile import sector. — VNA/VNS Photo |
Ho Chi Minh City — As an open economy with several free trade agreements (FTAs), Vietnam is committed to meeting its obligations in the automobile import sector.
However, experts point out that despite its efforts, Vietnam still needs to balance tariffs with the legal framework for importing cars, parts and spare parts.
They said the country needs more time to implement its promised provisions and strengthen trade and investment relations with other countries.
According to the Ministry of Industry and Trade, as of August 2023, the country has 16 free trade agreements (FTAs) and is globally recognized as an open economy.
It was announced that total merchandise imports in the first eight months of 2023 reached $207 billion, down 16.2% from the previous year.
Items such as scrap iron, jewelry, precious metals and manufactured goods, auto parts, and spare parts decreased.
On the other hand, the number of passenger cars with fewer than nine seats (up 3.6%) increased.
Vietnam mainly imports completed vehicles (CBU) from Asian countries.
According to the General Department of Customs’ 2022 report, Indonesia and Thailand are Vietnam’s two largest export markets, accounting for 41.9 percent and 41.5 percent of the market share, respectively.
According to the report, China accounts for 10%, while the US and EU account for 6.6%.
Similarly, for auto parts and replacement parts, Vietnam mainly imports from South Korea, China, ASEAN countries, and Japan.
South Korea has the largest market share, accounting for 26 percent of the total national import sales of this group of products. The market share of EU countries is very small (about 1.83%).
The discrepancy in market shares is mainly due to preferential tariff policies, in addition to geographical advantages and established bilateral and multilateral relationships.
Currently, under the ASEAN Trade in Goods Agreement (ATIGA), Vietnam is applying zero percent tariffs on auto parts and spare parts imported from ASEAN countries until the end of 2027.
Similarly, many auto parts and spare parts imported from South Korea will also be subject to zero percent tariffs starting in 2022, according to a government ordinance promulgated in 2022.
However, tariffs on auto parts and replacement parts imported from the 27 EU countries remain relatively high.
According to the EU-Vietnam Free Trade Agreement (EVFTA) and the UK-Vietnam Free Trade Agreement (UKVFTA), import duty rates will be gradually reduced to zero percent by 2027.
For example, under the EVFTA, car tires are currently subject to a 12.5% tariff in 2023, which is scheduled to be reduced to 0% by 2027.
Under the UKVFTA, some products will be subject to zero per cent tariffs as early as 2025.
Regarding customs clearance of goods, the government has issued a decree regulating the inspection and certification of technical safety and environmental protection of imported vehicles and parts.
This is in line with international treaties to which Vietnam is a party.
The Decree will take effect from October 1, 2023, and will prioritize the clearance of imported vehicles and parts that meet certain standards.
Furthermore, under the EVFTA, Vietnam will accept UNECE approval labels on imported parts and equipment from the EU and the UK in the future.
According to ZF Aftermarket’s assessment, despite the difference in import tax rates, Vietnam still has a large market potential for automobiles and auto parts and spare parts.
The number of new cars on Vietnam’s roads is expected to increase by 10% over the next five years, indicating high demand for purchasing auto parts and spare parts. —VNS
