According to a Reuters report, Vietnam has proposed a graduated increase in car part tariffs to a ceiling of 50 percent by 2005 in a compromise to placate carmakers’ worries over duty increases.

Carmakers have warned the communist-run government that the fast-growing industry would be crippled and factories for cars, buses and trucks might be shut down as a result of Completely Knocked Down (CKD) kit tariff increases proposed by the government as a means to encourage increased parts localisation. Most cars made in Vietnam are assembled from imported CKD kits.

According to Reuters, the Ministry of Finance has recommended that the import tax on auto components, currently at 20 percent, should rise to 30 percent by April 1, 2003, 40 percent by January 1, 2004, and 50 percent by the following year. Previously, the increase was to have taken place all at once.

Reuters reported that the eleven foreign carmakers operating in the country have until March 1 to respond to the proposal.