Cars 'unsold', many localities propose reducing registration fees to stimulate demand

In a report sent to the local Department of Industry and Trade (Ministry of Industry and Trade), the Department of Industry and Trade of Vinh Phuc province said that Toyota Vietnam Company - a large FDI enterprise in the locality - had a 37% decrease in output in the first quarter of 2023, equivalent to a decrease of 2,802 vehicles compared to the first quarter of 2022. Sales decreased by 24%, equivalent to a decrease of 1,760 vehicles, and inventory increased by 347%, equivalent to an increase of 1,931 vehicles.

At a working session with the Ministry of Industry and Trade delegation this week, leaders of Vinh Phuc province asked the Ministry of Industry and Trade to recommend the Government to issue policies to develop the automobile and motorbike industry.

In the immediate future, consider continuing to reduce registration fees (RTF) for domestically produced and assembled cars to stimulate domestic consumption and production.

Citing evidence from the automobile factory located in the area, Thanh Cong Group Joint Stock Company, the People's Committee of Ninh Binh province, in a document sent to the Government and ministries and branches, also reflected that Thanh Cong's automobile production and consumption had decreased significantly: In January 2023, the output reached only nearly 3,000 vehicles, a decrease of 4,939 vehicles (equivalent to 62.5%) compared to January 2021 and a decrease of more than 3,700 vehicles (equivalent to 55.8%) compared to January 2022.

Therefore, Ninh Binh province proposed to the Government and relevant ministries and branches solutions to support automobile manufacturing enterprises. Among them, there is a solution to reduce 50% of registration fees for domestically produced and assembled automobiles within a suitable period of time.

Domestic automobile production is facing difficulties, leading to difficulties in the supporting industry.

Previously, the Vietnam Automobile Manufacturers Association (VAMA) and a number of associations proposed postponing the payment of special consumption tax (SCT) in 2023 and reducing 50% of registration fees for domestically produced and assembled vehicles.

The reason is that since the end of the fourth quarter of 2022, the auto market has been affected by rising bank interest rates and low credit limits. Sales of the entire market in January 2023 decreased by 60% compared to December 2022 and only 54% compared to the same period in 2022.

According to VAMA statistics, the total cumulative sales volume of member companies in the first quarter of 2023 all decreased sharply. Accordingly, Thaco KIA only reached 8,600 units, down 49%, Mitsubishi down 21%, Suzuki down 29%, Mazda down 25%, Toyota Vietnam down 37%... compared to the same period last year.

Similarly, the Vietnam Association of Mechanical Industry (VAMI) also pointed out that the decline in vehicle consumption has led to a decline in orders for the supporting and mechanical industries. In the short term, if purchasing power does not improve and the market does not increase again, to reduce inventory pressure, companies will find it difficult to maintain a stable production rate and will be forced to reduce capacity and labor.

In a document sent to the Ministry of Finance on April 25, the Ministry of Industry and Trade said: In the first three months of 2023, total market sales reached 77,090 vehicles, down 31% over the same period in 2022.

Therefore, the Ministry of Industry and Trade believes that: Continuing to apply the policy of supporting the reduction of registration fees for domestically produced and assembled cars for an appropriate period of time is necessary and consistent with the general spirit, contributing to stimulating consumption of domestically produced and assembled cars, supporting automobile businesses and distributors to sell their remaining vehicles.

According to the Ministry of Industry and Trade, it is possible to consider applying this policy until the end of 2023.

However, with the opposite view, the Ministry of Finance believes that if the registration fee for domestically produced and assembled cars is continued to be reduced by 50%, it will negatively affect the implementation of international commitments, such as the WTO.

Furthermore, in a document sent to the Prime Minister on April 28, the Ministry of Finance noted that continuing to reduce registration fees for domestically produced and assembled cars, in addition to reducing state budget revenue, will also have a certain impact on the 2023 budget balance of many localities.

From the above analysis, the Ministry of Finance submitted to the Prime Minister that it has not yet implemented a 50% reduction in the LPTB collection rate for domestically produced and assembled cars.

2 Scenarios for the registration fee reduction plan:

In case the Prime Minister decides to implement the policy of reducing the LPTB collection rate for domestically produced and assembled automobiles, the Ministry of Finance proposes to consider one of two options.

Option 1: Reduce 50% of the LPTB collection rate for domestically manufactured and assembled cars. This option reduces state budget revenue by about VND 8,000-9,000 billion (implemented in the first 6 months of 2022, the revenue reduction due to policy adjustment is VND 8,727 billion).

Option 2: Reduce 50% of the LPTB collection rate for both domestically produced and assembled cars and imported cars. This option reduces the state budget revenue by about 15-16 trillion VND.

Statistics show that the LPTB revenue for automobiles accounts for about 70% of the total LPTB revenue (the total LPTB revenue for automobiles in 2021 is 27,318 billion VND, accounting for 72% of the total LPTB revenue and in 2022 it is 32,398 billion VND, accounting for 68% of the total LPTB revenue).

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