Industry Trend Analysis - Tariff Elimination To Provide Contrasting Effects - MAY 2017


BMI View : The elimination of tariffs on automobiles imported from ASEAN member countries into Vietnam from 2018 will have both positive and negative effects on our outlook for the country ' s autos market. This will see automakers producing in Vietnam look to take advantage of the cost effectiveness of importing vehicles, which will see vehicle production levels start to decline and thus hamper the development of the local autos manufacturing industry .

The reduction of tariffs on imported complete built-up units (CBUs) from the Association of Southeast Asian Nations (ASEAN) member countries will have both positive and negative effects on our outlook for the Vietnamese autos market in 2018. In accordance with the ASEAN Trade in Goods Agreement 2016-2018, tariffs on automobiles imported from ASEAN member countries into Vietnam will be reduced to 0% in 2018, from the current 30%.

We believe this will have a negative effect on our outlook for total vehicle production in Vietnam as output levels fall as automakers switch strategies towards vehicle importation away from local manufacturing. In contrast, we expect this elimination of tariffs will have a positive impact on our outlook for total vehicle demand as consumers gain access to cheaper vehicles. We currently forecast vehicle production and sales in Vietnam to grow to 185,068 units and 365,407 units respectively in 2018.

Tariff Elimination Presents Both Upsides And Downsides
Vietnam - Vehicle Production And Sales, Units
e/f = BMI estimate/forecast. Source: National sources, BMI

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