The Minister of Science and Technology has issued a circular to nullify some documents on methods of determining automobile localization rates.

Once it becomes effective on October 1 this year, Circular 11/2022/TT-BKHCN dated August 10 will replace the Minister of Science and Technology’s Decision 28 of October 1, 2004, Decision 05 of May 11, 2005, and Circular 5 of March 12, 2012.

Under current regulations, the automobile localization rates are determined by clusters of components produced in the country. Meanwhile, other countries calculate such rates as a percentage of domestic production value.

This makes it difficult for businesses to enjoy the preferential import duty rate of zero percent if the automobile localization rate within the ASEAN is 40 percent.

The current average localization rate of passenger cars with nine seats is as low as 7-10 percent, according to Deputy Minister of Industry and Trade Do Thang Hai. Such rate is targeted to reach 30-40 percent by 2020, 40-45 percent by 2025 and 50-55 percent by 2030.

According to the Ministry of Industry and Trade (MoIT), the current localization rate is now 40-50 percent for trucks, and 55 percent for buses. Therefore, the current regulations on methods of determining the localization rate were no longer conformable.

Automotive experts said the abolition of these regulations is in line with the development and change of technological processes of automobile manufacture and assembly in the country and the world to ensure transparency. The abolition will also help ensure conformity with international standards.

The removal of those regulations will also help improve the investment climate and allow domestic automobile manufacturers to maintain production in competition with completely-built-up (CBU) cars imported from ASEAN countries with a tax rate of zero percent from 2018.