In its White Book 2020, the national chapter of the European Chamber of Commerce, EuroCham Vietnam, notes that of 19 imported European auto brands in Vietnam, only Mercedes and Peugeot enjoy the 50 percent reduction in registration fees because some of their models are domestically assembled.

Although stimulating consumption in the auto market is necessary, a temporary remedy supporting national preference is not relevant at a time when Covid-19 is clearly a global issue, it argues.

“Such discrimination in favor of locally assembled vehicles is not casting the intended positive light for Vietnam with the European Union when the EVFTA is expected to enter into force soon,” it says, referring to the EU-Vietnam Free Trade Agreement which is expected to take effect in August.

EuroCham has also proposed a 50 percent reduction in value-added tax for both imported and locally produced cars.

On June 28, Vietnam cut registration fees by half for locally produced cars from 10-12 percent of the car price to 5-6 percent in an effort to boost car sales, which had plummeted in the first five months of the year due to the Covid-19 pandemic.

The Finance Ministry had last month expressed reservations over cutting registration fees by half for just locally produced cars saying it could be a violation of international commitments to non-discrimination between domestic and imported products.

Auto sales in the first five months fell 34 percent year-on-year to 79,396 units, according to the Vietnam Automobile Manufacturers Association (VAMA). Major brands like Toyota, Ford and Honda closed their factories and dealerships for two weeks in April over the Covid-19 pandemic.

Vietnam imported 28,523 cars with nine seats or less in the first five months this year, down 40 percent year-on-year. According to Vietnam Customs, 90 percent of the imports were from Indonesia and Thailand.