Recovery signals
From the beginning of 2018, a number of regulations related to the automobile sector have been enforced, including the Government's Decree 125 stipulating a preferential import tax rate of 0% on imported vehicle components, the regulations on the preferential import tax rate of 0% on complete cars among ASEAN countries, and Decree 116 on auto manufacture, assembly, import, maintenance and warranty services.
These policies have immediately had a strong impact on the domestic automobile market, causing difficulties for car importers, resulting in a sharp decline in the number of imported cars.
According to the General Department of Vietnam Customs, the number of complete cars imported into Vietnam was only 12,380 units worth US$329 million in the first six months of this year, a sharp decrease of 75.7% in quantity and 68.3% in value compared to the same period in 2017.
In contrast, due to many incentives from the new policies, domestic auto assembly companies have seized the opportunity to expand their production and raise capacity. As a result, the number of domestically produced and assembled cars has seen a strong rebound, reaching 114,600 units in the first six months of this year, an increase of 15.5% over the same period last year.
However, the improvement in domestic auto production and assembly cannot prevent the decline of the Vietnamese auto market as statistics from the Vietnam Automobile Manufacturers Association (VAMA) show that the total sales of the auto market was reported at 125,659 vehicles in the first half of 2018, down 6% over the same period last year.
However, forecasts and data are indicating a recovery of the auto market in the remaining months of the year. In fact, the volume of imported cars has increased again since June this year, reaching 3,356 units with a total value of US$82 million, up 45.6% in volume and 21.4% in value compared to May.
In the week from July 27 to August 2, the number of imported complete cars was triple that of the previous week with 1,935 units equivalent to US$39.7 million.
Toyota Motor Vietnam (TMV) said on August 9 that it sold 4,270 Toyota vehicles (excluding Lexus) in July, equivalent to the same period last year. In particular, the total sales of domestically assembled vehicles including Vios, Innova, Camry and Corolla Altis soared by 50% over the corresponding period last year. Total sales of Toyota's domestically assembled vehicles reached nearly 29,700 units in the first seven months of this year, a rise of 32% over the same period in 2017.
Experts predict that car imports from the third quarter onwards will surge strongly compared to the first two quarters of this year as enterprises will have adapted to the new regulations, particularly Decree 116. In addition, the fact has been proved that car sales often go up in the remaining months of the year, beginning from September.
Small cars on the rise
Along with the increase of imported cars, the appearance of a number of new auto models is also a factor fueling the market. On the first day of August, Toyota launched the new 2018 versions of two models Vios and Yaris assembled in Vietnam. They are Toyota's strategic models which have consistently ranked first in the middle-class small car segment and always topped the list of the best-selling models in the market.
In addition, the segment of affordable small cars is also growing with the appearance of a series of new imported complete models with prices of around VND300 million (US$12,900).
New models including Toyota Wigo or Celerio of Suzuki Vietnam imported from Thailand are expected to compete with the heavyweights of Hyundai i10, Kia Morning and Chevrolet Spark, which are currently dominating the market in this segment, adding to the range of choice for consumers.
According to auto traders, the segment of small cars with high energy efficiency has huge potential for growth as they are optimal choices for Vietnamese consumers with low income dealing with inadequate transport infrastructure and high petrol prices in Vietnam.
The small car models also have attractive designs and adequate equipment and technology in addition to reasonable prices which can meet the requirements of a large number of customers, especially the young. It can be seen that small car models with the combination of quality, modern features and reasonable prices, will attract ever more customers in the near future.
