Increasing Pressure on Truck Prices

 

The new method of calculating tax on imported truck components from early 2007 pushed up the price of components and spare parts by over 10 per cent, and many vehicle makers have increased the price of their trucks by around 5 per cent. Moreover, from July 1, 2007, Vietnam will officially apply Euro 2 emission standards on all new models of automobiles and motorbikes. Mr Do Huu Duc, Deputy General Director of Vietnam Register, said the Euro 2 emission standards would be applied only on new imported and locally made vehicles, while operational vehicles with certificates under old safety and environment standards will have one more year to reach the new standards.

 

According to experts, if Euro 2 emission standards are applied, foreign-invested carmakers will have no major difficulties because most of their products already meet the new requirements. However, the new norm is a real challenge for Vietnamese automakers, especially those with poor investment plans.

Since the new criteria are not imposed immediately, carmakers can still manufacture existing models for one more year, but this may not be cost effective as consumers are keen on new, modern and environment-friendly products.

Mr Bui Van Huu, Chairman of TMT Company, said an engine meeting the Euro 2 emission standard is US$400-1,600 more expensive than a substandard one. Although the price for the new engine is 12-15 per cent higher, consumers will benefit because the new engine consumes less fuel. Mr Bui Ngoc Huyen, General Director of Vinaxuki, added that the engine meeting Euro 2 standards saves 20-24 per cent on fuel costs. Therefore, the added payment for the vehicles with new engines will be offset after one year of operation.

 

This is a top concern among transport companies, because fuel prices will be higher than current rates after the “floating” mechanism is fully applied. Hence, the cost-savings of fuel will be taken into account.

In fact, the application of Euro 2 emission standards will be effective in less than two years, but the “technical specifications applied to new automobiles manufactured and assembled in Vietnam certified by the Vietnam Register” on the

www.vr.org.vn does not specify the level of emission standards. Mr Duc explained, “If there are regulations, [we] will check but [we] need to verify many factors in checking; thus, if [the vehicles] are eligible, [we] will issue a common certificate. That’s why the specifications for engines are not meticulous as for Euro 2 standards.”

 

As a result, carmakers’ announcement of “meeting Euro 2 emission standard” is unclear for consumers. Until now, only Vinaxuki dares to clearly print the names of engines compatible to Euro 2 emission standards on its vehicles. To affirm this, the manufacturer will show engine purchase orders to the payment banks. It will not print the “engine meets Euro 2 standards” on Vinaxuki vehicles incompatible to Euro 2 standards.

 

To protect the legitimate rights and interests of consumers, the Vietnam Register should provide clearer information on environment emission criteria for the reference of consumers. This will also prevent the manufacturing of substandard products by bad investors.