Several foreign car makers in Vietnam, including dominant assembler Toyota, are raising retail prices following a hike in tariffs on imported parts, dealers told Reuters on Thursday.


“The government’s decision to raise tariffs leaves us with no choice but to follow their action,” an unnamed executive at a Toyota dealership in Ho Chi Minh City told the news agency.


Toyota Motor Co, which has the biggest share – an estimated 26% – of Vietnam’s car market, was the first of the 11 foreign manufacturers in the communist country to raise retail prices by up to 3.3%, Reuters said.


The General Tax Bureau hiked tariffs on imported vehicle parts to 25% from 20% on September 1 in a bid to spur manufacturers to make vehicle parts in the country rather than import them – Vietnam faces a widening trade gap, Reuters noted.


“All automakers will have to increase prices in order to stay in business,” a Suzuki car dealer in Hanoi reportedly said.


Reuters said Suzuki has advised clients about an increase in prices for all of its models as a result of the tariff change but no details were immediately available on the size of the hikes.


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


Vietnam’s law makers approved a special consumption tax in May that raises the retail price of a standard five-seat car by more than 20% in 2004, and by 40% in 2005, Reuters added.