With the free trade agreement (FTA) between Vietnam and the Eurasian Economic Union (EAEU) taking effect from October 5, many types of Russian autos will be exempt from import tariffs but a surge in auto imports from Russia is unlikely.
Besides the VN-EAEU FTA, the two protocols Vietnam signed with the governments of Belarus and Russia on production of motor vehicles in Vietnam would enter into force on the same date. Draft decisions of the Prime Minister on the implementation of the two protocols have been passed around for comment.
According to the draft decision on the execution of the Vietnam-Russia protocol, joint ventures between three Russian firms, GAZ, KAMAZ and UAZ, and Vietnamese enterprises can enjoy tax exemptions within the auto import quota agreed by the two sides.
Import tax breaks for some completely built-up (CBU) autos are designed to gauge market demand in Vietnam. In addition, Vietnam will give duty-free quotas to auto parts imported by the joint ventures for auto assembly in the first five years before such tariffs fall to 0%.
Some experts and local auto firms have expressed concern over a possible influx of Russian vehicles into Vietnam.
A source familiar with the matter told the Daily that under the two protocols, autos and auto parts made in Russia and Belarus will enjoy an import tax waiver but this goes with many conditions.
The protocols only benefit joint ventures between Vietnamese and Russian or Belarusian businesses. Just three Russian firms and one Belarusian company can establish joint ventures with local enterprises.
They are required to work out annual production plans in Vietnam, which must include terms on technology transfer and personnel training. These plans must go before Vietnam’s competent authorities for approval.
The local content ratios of special-purpose vehicles and sport cars, trucks and over-ten-seat autos must reach 40%, 45% and 50% in 2025, respectively.
Import quotas for all Vietnamese-Russian joint ventures are estimated at 800 units in 2016, 850 in 2017 and 900 in 2018. Russia has to write to Vietnam’s Ministry of Industry and Trade informing the quota for each business.
However, the ministry has yet to receive any documents from the Russian side, the source said.
Joint ventures must seek permission from the ministry for each duty-free auto shipment.
According to the draft decisions, import quotas will drop on an annual basis.
At present, the three Russian businesses have yet to set up joint ventures with Vietnamese firms. Therefore, duty-free auto imports might not happen this year.
At a press conference for Vietnam International Motorshow 2016, the organizer of the event said Russia’s UAZ autos will be displayed at the exhibition in HCMC on October 26-30. UAZ’s participation will mark its return to the Vietnamese market but it is unclear UAZ or its partner in Vietnam will showcase the product.
Local media said Auto K has become an official distributor of UAZ in Vietnam in 30 years. Auto K will introduce sport utility vehicle (SUV) UAZ Patriot at the upcoming exhibition.
Under commitments between the two sides, Auto K will sell all UAZ models on the local market.
UAZ produces SUV, pick-up, off-road and commercial vehicles in Russia. Auto K has yet to unveil prices of UAZ cars.
Even if UAZ autos are exempt from import tariffs, this would not leave any significant impact on the local market. The reason is there are annual quotas of less than 1,000 units subject to tax-free auto imports. The figure is too small compared to some 250,000 cars consumed in Vietnam a year.
Source : http://english.thesaigontimes.vn
Key words : Auto imports, from Russia, unlikely to, soar after VN-EAEU, pact, takes effect.
