HANOI -- As the looming end of import tariffs stokes fears of cheap cars from abroad, Toyota Motor is urging the government to provide tax incentives for keeping production in Vietnam, with an executive warning that the automaker might otherwise leave.
"Unless the Vietnamese government puts tax and other advantageous measures in place, the worst-case scenario (of withdrawal) is possible," said Kyoichi Tanada, managing officer in charge of the Mekong region.
Vietnam imposes a 50% tariff on imported vehicles. But after the Asean Economic Community is formed at the end of 2015, tariffs in the region will be scrapped altogether in 2018. This paints a threatening scenario in which cars imported from Thailand and Indonesia may carry lower prices than Vietnamese-built vehicles.
Toyota expects to churn out some 40,000 vehicles at its Vietnamese factory this year. But "with the tariff elimination, there will be no economic rationale to keep our production," Tanada said.
"It will be difficult for us to maintain our factory" unless the government introduces tax incentives for cars built in-country, he said.
In July, Prime Minister Nguyen Tan Dung approved a master plan for bolstering the nation's automotive industry, including a goal of having domestically made autos account for around 80% of the market by 2035. But no tax or other specific measures were included.
Toyota is scheduled to end Australian output at the close of 2017.
"The time is approaching for us to decide what to do with Vietnamese production in 2018 and beyond," Tanada said.
The Japanese automaker sold upwards of 33,000 autos in Vietnam last year, leading the market with a roughly 30% share.