Vehicle sales in Vietnam more than doubled in the first two months of 2007, according to the Vietnam Automobile Manufacturers Association.

This increase of 105% to 7,714 units should be seen in the light of very depressed market conditions a year ago in early 2006 – caused mainly by the uncertainty associated with changes in automotive policies.

The sharp rise in the early part of 2007, nevertheless, appears to be the continuation of a more sustained recovery in the domestic vehicle market that took root in the second half of 2006.

Import tariffs on new and used vehicles were lowered in January 2006, as part of the country’s commitment to entry into the World Trade Organisation.

While the SCT sales tax was increased at the same time, the expectation of much fiercer competition and price cuts delayed customers from buying new vehicles until much later in the year.

Substantial discounting did take place in 2006, especially in the latter part of the year. Combined with intense marketing activity during the 2006 Vietnam motor show in Ho Chi Min in October, the market was able to stage a strong second-half recovery.

After declining 53% in the first seven months of 2006 to 19,290 units, vehicle sales increased sharply in the final five months to finish the year up 2% at 40,823 units, compared with 39,876 in 2005.

Toyota benefited most from the market improvement, with a 25% increase in sales last year to just under 15,000 units – for a market share of over 36%. Almost 10,000 of these were Innova MPVs imported in kit form from Indonesia for local assembly (Toyota was one of the first automakers to set up a vehicle plant – initially building the Camry – after the Vietnam market opened up).

Truong Hai, which sells trucks sourced from South Korea, is the second-largest vehicle supplier with a market share of 13%.

Other major suppliers in this market are Isuzu and Ford, mostly with trucks and SUVs, and Vinaxuki, which sells commercial vehicles sourced from China’s Jinbei group. Honda began assembling the Civic passenger car in August and other manufacturers are preparing to follow, including Malaysia’s JRD Automobile and China’s Lifan Group.

Economic growth has also increased significantly since the first half of 2006, with full year GDP growth last year estimated at 8.1%. The stock market increased sharply in the second half and this has had a significant wealth-creating effect among the emerging middle classes.

With the country having joined the WTO at the beginning of 2007, confidence is running high. GDP growth is forecast by the Asia Development Bank (ADB) to accelerate to 8.3% this year, despite an expected slow-down in growth in major export markets this year.

All segments of the economy are expected to expand, including the automotive sector.

Tony Pugliese