Production dropped by 40 percent for the automobile industry, showingthat the sector has not yet recovered from the 2012 economic crisis,said participants in an automobile workgroup at the Vietnam BusinessForum held recently.

The industry sold 30,414 carsin the first four months of this year, a moderate increase comparedwith last year's sales of 29,503 cars.

Vietnamhas a population of nearly 90 million, which is estimated to increaseto 100 million in the next 10 years. GDP now stands at 1,300 USD perhead and is expected to rise to 4,000 USD by 2020.

There is one car for five hundred people, so the industry hassignificant potential to develop. However, manufacturers are in adifficult position as supply currently exceeds demand. ToyotaVietnam sold nearly 25,000 cars in 2012, far short of its productioncapacity of 36,500, according to the Vietnam Automobile Manufacturers'Association.

Similarly, Ford Vietnam soldnearly 5,000 cars despite its capacity of 14,000 and General MotorsVietnam sold 5,600 with a capacity of 20,000.

Vietnam also imposes one of the highest subsidy taxes in Asia. Theprice of domestic cars is usually two or three times higher than theworld market price. Tariffs of 80 percent are imposed on car imports, inaddition to a special consumption tax of 45-70 percent and VAT of 10percent.

These costs affected the price of devicesand products, said workgroup members, which also affected Vietnam'sability to compete with other Asian countries. Meanwhile, the lack of adevelopment plan drastically slowed domestic manufacturing.

To solve the problem, the workgroup proposed the Government cut thespecial consumption tax to 50 percent for now and eventually eliminateit entirely. They also asked the Government to lift the consumption taxfor motorbikes 170cc and over.-VNA