Unleashed: The Impact of Zero Tariffs on US Cars in Vietnam - A Closer Look
Vietnam's proposal to lower car tariffs for American imports may yield minimal initial effects
VIETNAM - Vietnam's decision to scrap import tariffs on fully built-up (CBU) vehicles from the United States might stir excitement, but experts caution that it doesn't guarantee a major price drop for consumers. Let's dive into why that is.
In a candid chat, market analyst Khuāt Thế Đạt spilled the beans. While the policy reveals Vietnam's commitment to deepening ties with the US, the immediate impact on car prices is expected to be mild. This, he explained, is because import tariffs only account for a fraction of the vehicle's cost. Other factors, like the Special Consumption Tax (tickling the pockets of consumers with 50-60% for larger engines), VAT, logistics, and dealer margins, add to the hefty price tag.
It's worth mentioning that the 2018 tariff elimination on ASEAN countries' vehicles didn't result in the drastic price reductions many had anticipated. According to Đạt, even with zero tariffs, US car prices might only dip marginally.
Nguyễn Vĩnh Nam, another automotive whiz, weighed in, stating that the limited presence of American car brands in Vietnam further dampens the tariff change's initial impact. Brands like Chevrolet have taken a hike, while Ford mainly imports from Thailand, which already revels in tariff-free access.
Premium models such as the Jeep Wrangler and RAM 1500, which are among the few US cars found in Vietnam, are sky-high priced, out of reach for most consumers. Although the tariff cut could potentially nudge the prices down by 15-20%, market experts predict that the drops might not be jaw-dropping.
In the long run, however, this move could reshape the market. The arrival of American brands like Tesla might expand consumer choices, particularly in the high-end segment. Affordable US cars could also prod existing players—ASEAN imports, local assemblies, and even domestic manufacturers—to step up their game.
However, homegrown manufacturers face challenges. Their costs are 20% higher than imports from countries like Thailand and Indonesia due to low localisation rates (paling in comparison) and minuscule production scales[1]. If American cars manage to reap more benefits from this new tax policy, domestic automakers could struggle, especially in the premium segments.
Domestic vehicles, especially those within the budget segment, still possess some advantages. They reap the benefits of policies such as lower taxes for small engines and incentives on registration fees, along with frequent promotions to keep costs low for consumers [2].
A car showroom in Hà Nội. - VNS Photo Mai Hương
As competition intensifies, consumers can expect top-notch quality, superior customer service, and competitive pricing from their favorite brands. Ultimately, a more vibrant, healthier, and balanced market might emerge, enabling consumers to enjoy better value for their money. Buckle up, folks; the ride's just warming up!
Backstory:
- Despite the forecasted modest short-term impact, Vietnam's automobile market is experiencing a growth spurt[3]. The General Statistics Office reported that 56,563 new vehicles hit the market in April, representing a 4.8% surge compared to March. Local production reached a record 39,500 units, marking the highest monthly output since 2025 began. Compared to April 2024, domestic production soared by 60%.
- On the import side, Vietnam welcomed 17,063 vehicles worth $423 million in April, marking a 7.6% volume increase and a 28.2% value boost compared to March[3]. Imports jumped 47.7% in volume and 65.4% in value compared to April in the previous year.
- In the first four months of 2025, Vietnam imported 63,520 vehicles valued at $1.4 billion, marking a 45.2% increase in volume and a 50.7% rise in value year-on-year[3].
- This increase in both production and imports occurs despite hefty inventories at many dealerships, some of which already offer discounts on older models [3]. Experts believe this surplus, combined with moderate demand, could result in even lower prices in the coming months.
[1] Local Automakers in Vietnam Struggle as American Cars Benefit from Tariff Reduction
[2] Vietnam's Automobile Market Keeps Growing
[3] In Vietnam's Automobile Market, Growth Amid Oversupply
The car assembly line at the Honda Phúc Yên Factory, Vĩnh Phúc Province. If American cars benefit further from the new tax policy, local car makers could struggle, especially in the higher price segments. - VNA/VNS Photo Trần Việt
[4] Vietnam to Eliminate Import Tariffs on US Cars: What Does it Mean?
- The elimination of import tariffs on US cars might not significantly reduce the prices for consumers in Vietnam, as other factors like taxes, VAT, logistics, and dealer margins contribute substantially to the vehicle's cost.
- In addition to the automotive sector, the reduced tariffs could influence other areas such as business, health, and AI, as the deepening ties with the US might lead to increased trade and potential collaboration in these fields.
- The sports world might also experience a shift due to the growth in the Vietnamese automobile market, as improvements in customer service and competitive pricing could lead to higher demand for sports cars and SUVs.
- With the growing weather concerns regarding climate change, the increased availability of electric cars, such as those from Tesla, could positively impact the environment by reducing carbon emissions in Vietnam.
