Domestic Cars Give Way to Foreign Imports

Mr Akito Tachibana, General Director of Toyota Motor Vietnam (TMV) and Chairman of the Vietnam Automobile Manufacturers Association (VAMA), said the Vietnamese automobile market did not come up with expectations in 2011. Many carmakers witnessed slow sales in the first month of 2012. According to a January sales report released by VAMA, its members sold just 1,492 commercial cars, down 59 percent year on year; 1,782 passenger cars, down to 56 percent; and 929 multipurpose vehicles (MPV), down 67 percent. All automakers saw a sharp drop in sales in January. Vinastar - venture led by Japanese Mitsubishi - sold just 79 vehicles, down 83 percent; Sanyang handed only four units, down 90 percent; Ford Vietnam delivered 176 units, down 80 percent; Honda Vietnam transferred 33 units, down 93 percent; and Mercedes-Benz Vietnam handed over 71 units, down 69 percent. In reality, the demand for four-wheelers remained quite high.

 

In 2011, the Government of Vietnam decided to raise registration fee by 20 percent in Hanoi and by 15 percent in Ho Chi Minh City - a move described as the resolve to reduce traffic congestions in the two largest cities. Nonetheless, this policy will have implications extending to 2012 because Hanoi and HCM City are the biggest car markets in the country.

 

Worse still, policy factors like economic downturn, tightened monetary policy and exchange rate policy partly affect the auto market 2012. Given dismal outlook, Mr Tachibana said TMV had to revise business plans in 2012. Besides, according to the TMV development strategy, the period after 2018 will be a challenge for the company because preferential tariffs (signed with ASEAN countries) start to take effect. Then, VAMA’s sales will decline 20 percent. According to Tachibana, by 2018, at most three foreign-invested carmakers can stay in Vietnam.

 

But, many economists pointed out that three carmakers seemed to be too many at that time because import tariffs on automobile will be lowered to 50 percent in 2014 and to 0-5 percent in 2018. The advantage of foreign-invested cars over locally made ones is clearly seen by foreign carmakers.

 

For that reason, some carmakers have added the function of importing and distributing cars. With advantages of direct sales, good after-sales services and zero completion with pure four-wheeler importers, the Vietnamese auto market is forecast to be driven by foreign-led joint ventures. But, they will not manufacture automobiles at that time. Instead, they import directly from Thailand, Indonesia and other nations for sales in Vietnam. According to analyses, if Vietnam fails to develop an automobile industry, it will have to spend US$12 billion to import cars of less than 10 seats a year from 2025. Alarmingly, the huge automobile market will fall into the hands of foreign suppliers.