Tax hike drives Vietnamese consumers away from luxury cars

Higher tax rates on luxury cars have led to falling sales of many famous car brands in Vietnam.

Lexus, the luxury division of Japanese automaker Toyota, recorded sales of 24 units in July, plummeting from 242 units in June.

German luxury brand Mercedes also saw a slight fall in sales to 489 units, down 13 units from a month ago.

Hai Khang, a car trader, told VnExpress that there were many reasons behind the drop in car sales, one of which was adjustments to a special consumption tax.

Specifically, tax rates on luxury cars used to range from 45 percent to 150 percent, but some have risen by up to 90 percent since the beginning of July.

This pushed the price for a Lexus LX570 to VND8 billion ($360,000) in July from VND5.7 billion in June. "The increase of VND2.3 billion can make even the nouveau riche hesitate," Khang said, adding that many customers are looking at other Lexus models or cheaper brands.

Khang predicts that in August, car manufacturers may still face low sales as it coincides with the seventh month of the lunar calendar, known in Vietnam as the Month of Forsaken Spirits, when people often avoid purchasing new items.

Data from the Vietnam Automobile Manufacturer Association showed that July's car sales saw an on-year increase of 38 percent to touch more than 28,000 units, of which locally built-up automobiles accounted for 74 percent or around 20,700 units. Imported cars stood at more than 7,700 units, mainly small-engine models.

Source: VnE