HCMC – The Government has approved a proposal to reduce the registration fee for domestically manufactured automobiles by 50%. However, the Ministry of Finance has predicted that the fee cut may not have the desired impact.

The Ministry of Finance, along with relevant agencies, has been tasked with drafting a decree to outline the revised registration fee rates for domestically manufactured and assembled cars. The draft will be submitted to the Government for review by June 15, 2023, and is expected to come into force by the end of the year.

While the fee cut is seen as a solution to stimulate demand and relieve pressure on local manufacturers during the economic downturn, the ministry believes its effect will not be the same as previous cuts. The main reason for this is supply chain disruptions that domestic auto manufacturers faced in 2020 and 2022. The 50% reduction in the registration fee during those periods allowed carmakers to address supply chain issues.

As a result, the number of registered automobiles in the second half of 2020 doubled compared to the first half, averaging 34,900 cars per month. A similar surge in sales was observed during the fee cut from December 2021 to late May 2022.

The significant increase in car sales led to a strong rise in the collection of the registration fee, special consumption tax, and value-added tax. This helped offset the estimated loss in budget revenue resulting from the registration fee cuts.

However, the current situation is different, according to the ministry. The reduced registration fees may not be sufficient to boost car sales due to weak demand.

Consequently, the policy would lead to a loss of VND8,000-VND9,000 billion in the state budget revenue, as the collection from special consumption and value-added taxes would not fully compensate for the reduction in registration fee. Additionally, the lowering of the fee may cause a budget deficit on the local level.