Vietnam Cuts Lube Import Tax

Vietnam no longer collects tariffs on lubricants imported from Association of Southeast Asian Nations member states, which will open up the countrys growing automotive lubricant market to international players, experts say.

The agreement to reduce import tariffs for lube products from 5 percent to zero, effective Jan. 1, was made under the ASEAN Economic Communitys Trade in Goods Agreement (ATGI).

The move opens the Vietnamese lubricants market to producers in Thailand, Indonesia, Singapore and elsewhere, said Leon Perera, CEO of Spire Research and Consulting, an industry consultancy specializing in emerging markets.

In the short-term, the [import] market will be driven by motorcycle lubricants, he said. Vietnam is one of the worlds largest and fastest-growing markets for motorcycles, and this growth will continue. In the longer-term, car lubricants [sales] will grow as Vietnam approaches the tipping point when car demand takes off.

The countrys high-end luxury car segment has grown rapidly in recent years, according to Kline & Co., a U.S.-based market research firm. In 2014, several luxury auto brands such as Rolls-Royce, Bentley, Lexus, Infiniti, and Range Rover set up dealership networks, driving demand for synthetic lubricants, Kline said in an Oct. 2015 report titled, Seven Asia-Pacific Lubricants Markets You Need to Know About.

Kline also predicted growth in the countrys light- and heavy-duty commercial vehicle lubes segment. The growth is driven in part by a modernization of the commercial fleet spurred by a relatively new Vietnamese regulation that forbids the use of commercial trucks older than 25 years.

Vietnams lubricant market is [already] relatively open, with strong presence from players in the United States and Japan, as well as other parts of Asia, Perera added. Vietnam has a number of strong, international players producing lubricants domestically, but any export bump is unlikely to be massive, he noted. The market growth is still sufficient to sustain many players in the short to medium term.

According to the latest statistics from the ASEAN Automotive Federation, sales of motor vehicles in Vietnam jumped 53 percent to 20,921 units from January to November 2015 compared to the same period 2014.

The ASEAN Economic Community was established to integrate the 10 member countries – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam – into a single market and production base. ATIGA is one of the several agreements for the realization of AEC.