Can Vietnam 'pick up the first batch' of the wave of electric cars?

Vietnam will reduce special consumption tax and registration fee for electric cars, these policies are expected to become a lever for Vietnamese electric vehicle market - currently at the starting line, to quickly develop. Vietnam has policies to "wait in front" for the wave of electric cars. 

After a period of research, Vietnam has had stronger policies to encourage the development of electric cars. Recently, the Government has issued a Decree regulating registration fees, in which, battery electric cars are exempt from registration fees for 3 years from March 1, 2022. The first registration fee shall be paid at a rate equal to 50% of the fee for petrol and diesel cars with the same number of seats over the next two years. The new policy attracts the attention of a group of users in Vietnamese market who are intending to own electric cars.

Previously, the National Assembly also agreed to reduce the special consumption tax  for electric cars in an attempt to encourage investment in production and promptly seize opportunities to develop electric cars, thereby, contributing to reducing environmental pollution from vehicle emissions.

Specifically, from March 1, 2022 to the end of February 28, 2027, battery-powered electric cars with 9 seats or fewer will be subject to tax rate of 3%; From March 1, 2027, the tax rate will be 11%. The type that carries people from 10 to under 16 seats is 2%; from March 1, 2027 is 7%.

Electric cars carrying people from 16 seats to less than 24 seats will be subject to tax rate of 1%, from March 1, 2027, the tax rate is 4%. Meanwhile, the type that carries both people and goods has the special consumption tax rate of 2% and from March 1, 2027, the tax rate will be 7%.

Other types of electric cars will bear special consumption tax rates ranging from 5 to 15% depending on the type. In which, cars with less than 9 seats will be subject to a tax rate of 15% and those designed to carry both people and goods are 10%.

Two important preferential policies for electric cars will take effect at the same time, which is expected to bring many benefits to the "budding" electric vehicle market in Vietnam.

Previously, Vietnam had a number of tax reduction policies for assembling components and producing electric cars, but it was not attractive to manufacturers. New policies encouraging both domestic consumers and manufacturers are expected to be leverage, helping the market to catch up to the general trend of the auto industry, when battery-powered electric car industry of Vietnam and ASEAN countries have almost similar starting points.

Although it is not really attractive compared to some countries in the region, the implementation of preferential policies to attract investors earlier than other countries in the region will create great opportunities for domestic businesses producing battery-powered electric cars in Vietnam. 

Policy is only a short-term solution

In the face of the development trend of electric vehicles, many countries around the world are promoting electric vehicles through a variety of measures, including direct subsidies for both manufacturers and consumers, tax exemptions, and support for the development of electric vehicles. China is known as one of the most successful countries in promoting the production and sales of electric cars.

According to China Association of Automobile Manufacturers (CAAM), in 2011, only 5,000 electric vehicles were sold in China. By 2019, the number of electric vehicles consumed in this country has reached more than 1 million units. Although it only accounts for about 8% of consumption, it helps to make China the largest market and producer of electric vehicles in the world. This is thanks to stronger policies for electric vehicles made in China.

In 2009, Chinese government began to apply generous incentives for the production and use of electric vehicles. Manufacturers receive subsidies to reduce prices to encourage sales. This allowance is calculated according to the number of moves per charge. State spending on R&D, direct investment in electric vehicle companies and charging infrastructure. In addition to direct discounts, the state also has preferential policy to access license plate registration (for large cities that are restricted to control traffic).

According to experts, these policies have boosted faith of consumer and business, and spurred rapid electric vehicle penetration. This plays an important role in helping Chinese electric vehicle market to flourish.

Meanwhile, in ASEAN, Thailand, Indonesia or Malaysia have all expressed their ambitions with electric cars. With the ambition to become a major electric vehicle manufacturing "base" in the world, Thailand is giving many privileges to electric vehicle manufacturers in addition to incentives for users.

Thailand offers three-year tax exemption for plug-in hybrid vehicle manufacturers and a maximum eight-year corporate income tax exemption for battery electric vehicle manufacturers, subject to certain conditions. Manufacturers in the supply chain also enjoy incentives. Thailand adds many important components and spare parts of electric vehicles to the list of incentives; Manufacturers of equipment and components will be exempt from corporate tax for 8 years.

Researcher said that to be able to develop the electric vehicle market, incentives for users, manufacturers and building infrastructure are important conditions. However, policies from the Government are still only seen as measures to promote the market in the short term.

Although it is still being maintained as a market-boosting measure, some European countries are also considering phasing out these subsidy programs. Many car manufacturers expressed their concern that these are short-term measures and cannot create a sustainable electric car market.

Experts say that governments should focus more on developing infrastructure for electric cars such as car charging stations, or support the construction of battery factories to reduce vehicle costs. Government subsidies have boosted demand for electric vehicles in many areas. However, subsidies, especially cash subsidies, are seen as costly and what has happened in China serves as a warning that this is not a sustainable policy.

Source : diendandoanhnghiep