Mongolia to Increase Excise Tax on Imported Vehicles

IF Parliament approves a recently submitted proposal, Mongolia will soon double its excise tax on imported used cars.

In an effort to take some of the burden off Ulaanbaatar’s congested roads, the government plans to reduce auto imports. This year Ulaanbaatar had about 150,000 registered motor vehicles.
The growing need of vehicles in Mongolia will likely increase as the nation’s young population reaches driving age. According to US International Census data, there are 300,000 Mongolian boys and girls aged 15-19, making it the nations largest 5-year span demographic. Soon, these teenagers and young adults will be looking for affordable cars. For them, it is primarily a choice between used Chinese, Korean, or Japanese cars. Currently, Japanese cars dominate the market.

Current excise tax law imposes a fee ranging from US$500 to US$4,000 per vehicle depending on the automobile’s engine capacity and year of production, as well as its additional value-added tax, and import duty. Importing a 1997 Nissan Sunny with a 1,500 cc engine, for example, currently requires US$1,000 in taxes. Passing the new tax law would increase that fee to US$2,000 next month.

Small hatchback-type cars, which have become widely popular on Ulaanbaatar’s roads because of their small engine, require a smaller fee. According to Kh.Baatar, a used Japanese-car dealer, those increased taxes will go straight to consumers. “By mid-October, used car prices would increase by US$2,000 in average,” he said. “The price of Japanese used passenger car, which is now US$5,500, may become US$7,500 next month.”
According to Japan’s Customs Statistics Office, Mongolia has imported 14,322 used passenger cars from Japan in the first half of 2008, making the country one of the top five used car importers in the world after Russia, Chile, the United Arabian Emirates, and New Zealand.

Recently gathered statistics, which do not include data on trucks or commercial vehicles, indicate the total market value of used cars in Mongolia is approximately JPY4.3 trillion, JPY303,000 per unit in average. In 2004, Mongolia imported 6,000 used cars from Japan only. Just last year, when Mongolia placed 11th out of all country’s importing used Japanese passenger vehicles, that number increased to 17,000 units. This year some predict that figure will reach 30,000 units.

“Mongolia sounds like a very interesting place. We are very interested in developing our sales there. I hear that bigger cars will become more expensive. Smaller capacity cars may not be so affected,” said Simon Doherty, a sales and marketing manager of Japan Partner Company.

“Mongolia is a growing market. Japanese cars are a good value because they have a very strict inspection system here and the cars are in good condition. The roads here are very good so the cars are in good condition and because the roads are busy, the cars have low mileage,” Doherty said.
Delegates from the Japan Used Motor Vehicle Exporters Association (JUMVEA) attended a business forum held on September 22 in Ulaanbaatar to talk about Mongolia’s growing market for used cars. “The used car sales market of Mongolia has attracted member companies to do business with both Mongolian traders and individual buyers,” said Hiroshi Sato, Chairman of JUMVEA.

On September 12, the nation’s two major political parties, Mongolian People’s Revolutionary Party and Democratic Party, signed an agreement to form the coalition government until 2012. According to the agreement, the Government will support the importation of hybrid and low-emission engine vehicles in an effort to reduce Ulaanbaatar’s air pollution.

Go to Auto Trading Business Blog of Mongolia at http://autotrading.bblog.mn (in Mongolian)