End of promotion programs hurt Vietnam automobile sales

The domestic auto market in Vietnam is experiencing a decline in car sales after the promotion programs ended.

No customer is seen in a car showroom

The automobile market in Ho Chi Minh City in 2023 is quite gloomy, purchasing power is much weaker than in previous years. Plus, at the end of the year, the policy of reducing registration fees by 50 percent for domestically produced and assembled cars is about to end. Automobile showroom owners are worried as the prices of car types are going to increase again.

Sales reduced because the promotion ended

The car market in Ho Chi Minh City in the last days of the year is boring. A few customers have paid visits to new car showrooms in Binh Tan District’s An Lac Ward, Tan Binh District, Go Vap District, District 7, and District 1. Most customers are interested in cars priced from VND600 million to VND800 million in Japanese and Korean brands.

Comparing the number of visitors in November and the first 2 weeks of December 2023, salesman Vo Thanh Dat of Mazda Tan Son Nhat showroom in Phu Nhuan District said, the number of visitors was completely fewer in the last days of December. In comparison with December of previous years, the number of this year's visitors decreased by 40 percent to 50 percent.

According to Mr. Dat, at the beginning of the year, the Government issued Decree No. 41/2023/ND-CP regulating registration fee rates for cars, trailers or semi-trailers pulled by cars and similar vehicles manufactured and assembled domestically.

Accordingly, from July 1 to December 31, 2023, the registration fee rate is equal to 50 percent of the rate specified in Decree No. 10/2022/ND-CP of the Government regulating fees. From January 1, 2024, this policy will be abolished. Thus, the car price will increase again to an average of VND30 million-VND60 million each. Following the increase in car prices again near Tet, showroom owners moaned they will face more difficulties in increasing sales when the sales of 2023 have been very sluggish.

Meanwhile, the used car market is also extremely gloomy. In addition to weak demand, there is also the fact that along with the Government's 50 percent registration fee incentive, many car manufacturers have additional incentive policies, causing new car prices to drop sharply. Therefore, the sales volume of the used car market also dramatically declined compared to the same period last year.

A sales manager of a used car store on Phan Van Tri Street in Go Vap District said that for the whole year of 2023, used car dealers continuously reported losses while profits were only enough to maintain operations. People tightened their spending, so just a few people decided to buy used cars to use on the Tet holiday (the Lunar New Year)

At Mr. Hung's store, the price of a B-size sedan like the 2020 Toyota Vios E AT was reduced from VND 465 million last year to VND410 million this year but no one asked. Many people asked to buy the KIA Morning model in previous years whereas this year the price had to be drastically reduced but not many customers paid attention to it. Another model, the 2019 S version, had last year's price at VND330 million, now the price ranged from VND270 to VND280 million this December.

Salesman Nguyen Thanh Huy of an auto shop located in front of Highway 13 in Hiep Binh Phuoc Ward of Thu Duc City said that last year, a 2017 Mercedes E250 fetched about VND1, 350 billion now it was sold at VND 900 million. The store suffered a loss of more than VND400 million but no one had a look at it, Mr. Huy whined.

The automobile market is not bright

Ms. Nguyen Thi Hien, owner of the Toyota showroom on Pham Hung Street (District 8, Ho Chi Minh City) moaned that every time, car manufacturers launched discount promotions, owners of used car showrooms become even more worried, because imported used cars can’t be sold yet, but the price of the new car has been reduced, so owners of used car showroom surely lose money. In addition, the number of customers buying service cars has decreased sharply because this market is more competitive, along with the burden of interest rates.

Meanwhile, according to Mr. Huynh Van Sang, General Director of Toyota East Saigon Joint Stock Company, to stimulate consumer demand for the auto market, in addition to reduced registration fees, car manufacturers and showrooms need to continue to promotional policies and high discounts to attract customers.

Automotive expert Nguyen Minh Dong who has worked for many years for Volkswagen in Germany commented that the auto market will continue to be difficult in the first 6 months of 2024. To limit high inventory, car manufacturers will possibly have to reduce production and imports.

In addition, car manufacturers and dealers will have to launch high-discount old car models to reduce inventory and boost sales. Due to economic fluctuations, domestic demand for cars will still be low. Therefore, businesses have no choice but to reduce prices.

On the state management side, the Government should continue to have macroeconomic management policies. Moreover, the government should consider reducing registration fees by 50 percent, and reduce special consumption taxes to stimulate consumption demand.

According to data from the Vietnam Automobile Manufacturers Association, by the end of November 2023, around 263,200 vehicles were sold down 29 percent over the same period last year. Of which, passenger cars decrease by 31 percent, commercial vehicles decrease by 16 percent and specialized vehicles decrease by 57 percent. By the end of November this year, sales of domestically assembled cars decreased by 25 percent, while imported cars decreased by 34 percent compared to the same period last year.

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