The government has made the change through a decree it issued recently to amend import and export tariffs. To qualify for the zero percent import tax, the components must not be simply assembled without going through a manufacturing process, and so items like screws, bolts and rivets are ineligible.

Businesses seeking to benefit also need to fulfill certain other basic requirements.

Since 2017 import tax on automobile components, parts and materials has been zero if an importing business reaches the minimum output it has agreed to achieve. The Government has now scrapped the minimum output proviso.

Vietnam has been striving to develop its car industry for decades, but experts say the small market size has constrained local producers. The rate of local parts used in passenger cars in Vietnam is only 7-10 percent compared to 55-60 percent across Southeast Asia.

Auto sales fell 36 percent year-on-year in the first four months to 64,100 units as the Covid-19 pandemic crushed demand.