The move, which asks for an amendment to Circular 20, would also allow more car importers and dealers to join the market while boosting supplies of imported cars with a wider variety of brands.

Circular 20, which came into effect last June, stipulates that importers of cars with less than nine seats have to show proof that they are authorised dealers for foreign car manufacturers.

The documents have to be notarised by Vietnamese diplomatic representatives in the country of origin.

But most dealers said they would never be able to get the required documents as foreign auto companies which had joint ventures in Viet Nam would not give any such authorisation to importers.

The rule, which seems to solely allow joint ventures in Viet Nam to import cars, sent 80 per cent of private car importers and dealers nationwide bust.

According to the Ministry of Customs, Viet Nam imported 16,000 cars worth US$335 million in the first seven months of 2012, down 58 per cent in terms of volume and 44 per cent in terms of value over the corresponding period last year.

As a result, import tax revenue has also fallen.

According to a statistics from the Ministry of Finance released earlier this year, the local auto industry slump would dim the annual contribution of the sector to the State budget, which is estimated at US$2 billion annually.

Asked about his business plan if the measures came into effect, director of the Ha Noi Automobile Company Nguyen Van Dung said he would resume imports and trading of foreign cars.

Late last year, Dung was forced to turn his 300 sq.m showroom in Gia Lam District into a restaurant under a similar name, the Ha Noi Automobile Beer Restaurant.

Meanwhile, Nguyen Ba Hoc, director of the Hung Long automobile company, another prominent car importer which was fined VND40 million last year for importing 16 Lexus luxury sedans without the correct documentation, said it would renew his business if the Government loosened import sanctions.

"However, everchanging policies in the automobile sector discourage the development of the industry as a whole," he added.