With less than a month to go before higher taxes take effect, foreign car makers in Vietnam are pulling out the stops to lock in customers by dangling warranties, insurance or by just demonstrating simple arithmetic, Reuters reported.

The news agency said that, from January 1, 2004, the special consumption tax on passenger cars will rise to 24% from 5%, and value-added tax will double to 10%, under phased-in price hikes through 2007 to curb traffic and raise state revenues.

Vietnam's 11 foreign joint-venture car makers, which include Toyota, General Motors-Daewoo's Vidamco and Ford, have warned that increases in taxes and duties on imported parts would ruin the small sector, Reuters said.

The Vietnam Automobile Manufacturers Association has forecast sales for 2004 will dwindle to 22,000 units from 23,093 already sold in the first 11 months of 2003, the report added, noting that sales in November alone rose a scorching 51.1% from a year ago to 4,790 vehicles.

"We're continuing to lobby whatever way we can," Barry Ashton, finance director of Ford Vietnam Ltd, told Reuters - his company has invested $US102 million in a 14,000-unit capacity plant outside Hanoi.

Ford sent out detailed letters this month urging potential customers to buy before taxes rose, Reuters said.

Ford Vietnam's relationship marketing supervisor, Le Thanh Hai, told the news agency a new [Mazda 323-based] Ford Laser 2004 model would cost up to $US35,000 next year from $27,900. "The tax increase roadmap will continue until 2006," he reportedly said.

Reuters said Vietnam's average per capita income is about $400 annually but increasing sales of expensive cars indicate growing disposable incomes.

Toyota has been less direct, but it is the foreign car maker with the commanding lead, accounting for about 25% of the market, while Vidamco is number two, and Ford third, each with shares of less than 20%, the report added.

According to Reuters, like several car makers, Toyota lifted its retail prices by 3.3% after duties on imported vehicle parts were raised to 25% in September from 20%. Vietnam is trying to push more use of locally made parts as its trade gap widens, the report noted.

Reuters added that Toyota is offering to pay the ownership tax and provide a free one-year physical damage premium from its in-house insurer for those who buy before the end of 2003.

Auto market intelligence
from just-auto

• Auto component fitment forecasts
• OEM & tier 1 profiles & factory finder
• Analysis of 30+ auto technologies & more