Hanoi (VNA) - There isgreat anticipation that automobile prices in Vietnam will decrease by 10-15 percentin the case of older models and 5-10 percent in the case of new models asautomobile import tariffs are cut to zero under the ASEAN Trade in GoodsAgreement which takes effect in January 2018.

But some market analysts dismiss thelikelihood, saying in fact imported car prices are likely to rise significantlysince their supply would dry up while even the prices of domestically assembledvehicles would not come down.

Recent changes in the Investment Lawclassify certain automobile businesses as “conditional”. The Governmentrecently issued Decree No 116/2017/NĐ-CP to spell out the regulatory andlicensing conditions for automobile manufacturing, assembly, import,maintenance and warranty.

Importers are required to obtain anautomobile importing business licence from the Ministry of Industry and Trade.

To qualify for the licence, importersmust set up appropriate warranty and maintenance facilities and be authorisedby the manufacturers in exporting countries to conduct recalls in Vietnam ifneeded.

Importantly, quality inspectionprovisions with respect to imported vehicles are much stricter than currentregulations.

For example, importers are required toprovide a type of approval certificate from a competent foreign agency for theautomobiles they sell.

The certificate is a producer’sdeclaration that production samples of a design will meet specifiedperformance standards.

The document will contain informationlike the type of approval number, technical specifications and otherdata.

Besides, quality inspection will bedone on every imported vehicle unlike now when they check only a few atrandom.  

Satisfying quality inspection willcost importers hundreds of millions of dong, many times higher thannow.

This is expected to reduce auto importssubstantially, causing a widening gap between supply and the relentlesslyrising demand.

Besides, with respect to domesticmanufacturers, the decree stipulates certain requirements pertaining tofacilities, human resources, labour safety and hygiene, fire safety, as well asenvironmental protection.

They include the need to have testtracks that are at least 800 metres long to do more reliable safety tests. Mostmanufacturers do have tracks but of much shorterlength.    

This new requirement would also raiseautomobile manufacturers’ production costs to an extent.

The cost of making cars in Vietnam isalready 20 percent higher than in neighbouring countries since 60-80 percent ofcomponents and materials has to be imported in the absence of a developed automanufacturing eco-system. This entails packaging and logistics costs.

So noone should hold their breathexpecting local car prices to become cheaper in 2018.-VNA