To spur car makers to make vehicle parts in Vietnam rather than import them, the communist country will raise tariffs on imported parts to 25% next month from 20% now, a government official said on Thursday, according to Reuters.

“A new tariff regime will be applied from September 1 on imported auto parts,” an official from the finance ministry’s General Tax Bureau told the news agency.

The ministry has approved a rise of 5% on imported auto parts that will bring the import tax on parts for a five-seat sedan to 25% from the current 20 percent, he told Reuters.

The official, who declined to be identified, told the news agency the government intended the new tariffs to boost the use of locally made parts.

A Suzuki dealer in Hanoi told Reuters on Thursday the firm has stopped signing new purchase contracts with retail customers pending a price change as a result of the new tariffs, but did not say by how much the company would raise prices.

Before the rise, his firm had expected that a big jump in sales would follow the recent launch of Suzuki’s Vitara sport utility vehicle model, the report added.

“I am afraid this will hurt our sale now,” he told Reuters.

Vietnam’s 11 foreign joint venture car makers, which include Mercedes-Benz, Toyota, Ford and General Motors, also warned of dire consequences for the fast-growing industry, the report said, adding that rising disposable incomes have spurred purchases of cars, although motorcycles are still the vehicle of choice for Vietnam’s population of 80 million.

Reuters noted that the communist country’s lawmakers approved late in May a special consumption tax that would raise the retail price of a standard five-seat car by more than 20% in 2004 and 40% in 2005.

Domestic car sales by the 11 foreign-invested vehicle makers during the first seven months of this year surged nearly 35% to 18,646 vehicles year on year as buyers scrambled to beat the tax hikes, Reuters added.