Vietnam’s automotive industry rode a rollercoaster in 2009 as increased taxes brought sales down earlier in the year, only for tax cuts on passenger cars to inflate segment sales in the latter months of the year.

By the end of the year, total sales of domestically produced vehicles were 7% higher year-on-year (y-oy). The market was buoyed by a 47% rise in passenger car sales, on the back of tax cuts. However, BMI believes this has unbalanced the market as sales of SUVs and MPVs, usually one of the stronger segments in the country, were up by just 3%, and commercial vehicle sales fell by 7%. Passenger car sales were 125% higher in December while the SUV/MPV segment grew 20%, despite the higher taxes. Commercial vehicle sales rose 50%.

BMI expects positive annual growth in 2010 as pent-up demand is fulfilled. Evidence of this backlog came when Toyota and Honda Motor reported sales declines in June of 6% and 57% respectively. Local dealers claimed that this was largely due to a problem with fulfilling demand and that orders placed could not be filled until November-December. However, signs that the after-effects of the tariff changes are kicking in are evident as sales for Q110 are down by 2%, despite an 80% increase in passenger car sales. Again it is the MPV/SUV segment dragging on growth, with sales down 39% y-o-y, while commercial vehicle sales are down 2% y-o-y.

Fluctuating tariffs are a factor in Vietnam’s 12th position out of 14 markets in BMI’s Business Environment Ratings for the autos sector in Asia Pacific. However, the market has witnessed stellar growth, and according to the above-average rating for its potential over the next five years, sales growth should be maintained. The highest score is for market risk, which stands at 85.0. Its country risk score has also risen from 49.8 to 51.5, taking its total score for risks to realisation of returns up to 68.2. Vietnam is still a country we would expect to see climb the ratings in the future, particularly if its vehicle tariff policy becomes more consistent.

In terms of the competitive landscape, data show that, despite its recall issues, Toyota was still the most popular brand in Vietnam in 2009, with sales of 30,110 units and a market share of 25.2%, up from the 22% held in 2008. This was a 23% increase on the 24,421 units sold the year previously. The strongest sales performance of 2009 came from Mercedes-Benz Vietnam, with sales rising 60%. Sales of 3,399 units lifted the company to ninth place from 10th in 2008. Others suffered from the global downturn, however, with Mekong posting the largest drop of 62% y-o-y. Four of the top 10 locally producing carmakers posted positive growth in Q110, although the competitive landscape remained largely the same. Toyota retained its lead with growth of 34% y-o-y.