Vietnam's automobile market has remained stagnant since the beginning of the year due to several reasons, including higher vehicle registration fees in large cities and provinces. Nevertheless, many automobile enterprises continue consolidating their foothold in the market believing in the potential Vietnam's automobile market.

Black cloud

Statistics from the General Statistics Office of Vietnam (GSO) show that in the past six months Vietnam has imported between 3,000-4,000 vehicles a month. Vietnam's automobile importers last month imported about 3,000 automobiles with total import value of US$45 million, a 49.8 percent decrease in number and 55.1 percent in value compared to the same month last year.

According to automobile enterprises, the black cloud hanging over the imported automobile market was anticipated on account of a series of new policies on both brand new and secondhand imported automobiles being applied in 2011. Concretely, the General Department of Customs under the Ministry of Finance increased taxable prices of imported automobiles two times; the Ministry of Industry and Trade also implemented Ministerial Circular 2011/20 in June 2011 demanding that imported automobiles with less than nine seats be subject to more complicated import procedures.

Under the new regulations, automobile importers must prove they are authorized sales agents by showing letters of authority. These papers must be legally certified by a Vietnamese diplomatic mission abroad. In addition, car dealers must show certificates of car maintenance from eligible car repair shops granted by the Ministry of Transport to be allowed to put cars on the market.

Last month, automobile enterprises of Vietnam Automobile Manufacturers' Association (VAMA) sold only 4,274 automobiles, a 60 percent decrease compared to the same month last year, including 929 four-wheel-drive (4WD) multi-purpose automobiles. One of the major reasons for the downturn in last month's automobile sale number was an increase in registration fees for automobiles with less than 10 seats in Hanoi and Ho Chi Minh, equivalent to 20 percent and 15 percent of their sale prices respectively.

As both automobile sales agents and buyers find it hard this year to access bank loans, domestic automobile producers and distributors have decided to launch sales promotion campaigns in order to encourage their agents and attract more buyers.

Silver lining

"The fall in automobile sales number in Vietnam is indispensable and this situation will continue for some time, with the automobile market only looking up in last months of 2012. Vietnam's automobile industry has boomed along with the country's rapid economic growth and should now be regulated. Vietnamese buyers will soon get used to the new changes in the domestic automobile market," said South-East Asia Renault Chief Representative and Area Operations Manager Arnaud Mourgues.

Luxgen General Director Henry Hsieh from the Yulon Group shared Mr. Mourgues's viewpoint, adding that Vietnam has the potential to develop an automobile industry and domestic buyers are most interested in four and seven seat automobiles.

"Vietnam's automobile market is very interesting with presences of various automobile brands and the new regulations will gradually eliminate low quality products from the market. However, Vietnam's transport infrastructure should be improved in harmony with the increase in number of automobiles in circulation," said Chairman of Auto Motors Vietnam Lionel Rouyer.

Almost all automobile producers and traders are optimistic about Vietnam's automobile market as they foresee a growing demand in the future.

Source: VEN