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Old 06-03-2003, 14:57   #1 (permalink)
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Ford says Vietnam's auto tax puts local industry in question

June 3, 2003
Global Automotive Report

By Detroit News staff reports, Bloomberg News and wire services

HANOI -- Ford Motor Co.said an auto tax approved last week by the Vietnamese government puts in doubt the question of whether the nation's car industry will survive.

Vietnam's National Assembly last week voted to increase the special consumption tax applied to locally assembled passenger cars of up to five seats, to 24 percent next year and 80 percent by 2007 from 5 percent now. Taxes on vehicles with more than five seats and on commercial vehicles will grow by a smaller amount.

Ford's Vietnam unit, the third biggest manufacturer in the Southeast Asian country of 80 million people, sold 3,685 vehicles worth about $100 million last year and paid $15 million in taxes, according to J. Barry Ashton, finance director of Ford Vietnam. Michigan-based Ford's sales rose 92 percent last year, the biggest percentage increase of Vietnam's 11 foreign automakers.

"We're very disappointed that the National Assembly approved this proposal," Ashton said in an interview. "It will have a negative impact on the industry. Prices must rise significantly, or otherwise manufacturers will be in a significant loss-making position in 2004."

Ford, which began production in 1997 at a 75 percent-owned plant in Hai Duong province east of the capital of Hanoi, became profitable for the first time in 2001, he said. Profit increased last year, Ashton said, declining to give figures.

"If prices rise, volumes would probably fall and that would put the viability of the industry in question," he said. "Manufacturers will have to look again at their entire business model to determine if they can continue to operate here. It all depends on what the volume will fall to. We can increase the prices, but the volume will drop."
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