Vietnamese car sales grew a record 42% in the first three quarters, as buyers rushed to beat next year’s new taxes that are expected to push prices up, the Vietnam Investment Review reported.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
Foreign assemblers sold 25,794 cars during the period – just 1,000 less than last year, according to the Vietnam Automobile Makers Association (VAMA).
Toyota, which assembles the Hiace, Camry, Corolla Altis and the newly-launched Vios, remains the market leader with 7,609 cars sold, followed by Vidamco with 3,541 cars and Ford with 2,880.
Tens of thousands of new businesses set up since the introduction of the Enterprise Law in 2000 as well as the country’s high economic growth – second in Asia after China – are the major factors behind the surge in sales, the report said.
As the economy is expected to grow by more than 7% this year, VAMA has estimated this year’s sales will hit 38,000 – far below the annual combined production capacity of 150,000.
Car sales by the assemblers were less than 7,000 vehicles a year during the 1996-1999 period but grew to 13,955 in 2000. That figure doubled two years later.
However, the continuous sales growth in recent years does not guarantee a bright future for the fledgling industry.
Assemblers worry that next year’s increase in the special consumption tax and tariffs on imported parts will put the brakes on an industry that has only been profitable for a few years.
VAMA said car prices next year would increase by 25% if the special consumption tax of 24% was imposed on vehicles with less than six seats, pulling sales down to 22,000 cars. Sales would drop further if the tax increased to 40% in 2005 and 80% in 2007 as planned.
Mercedes Benz has become the third company after Toyota and Ford to increase prices following the 5% hike in tariffs on imported parts in early September. The company’s luxury C-180K Elegance sedan now costs $US2,286 more than before October 10. The E-240 costs $3,714 more.
Mercedes Benz general director Thomas Rapp said the company decided to increase prices to offset the higher costs resulting from the tariff increases.
Others have yet to adjust prices but said they would consider increasing them when the special consumption tax came into force.
The 11 foreign car assemblers have a combined investment of $526 million. They produced 84,752 vehicles last year, earning $1.83 billion and contributing $306 million to the State budget.
Cars are still out of reach for the majority of Vietnamese people who have an average annual income of around $400.
Vietnam’s market is a 10th of other regional countries and is not enough to invite more part makers to join, auto makers have said, according to the Vietnam Investment Review.
