Business Monitor said, while Vietnam industry sales suffered a sharp contraction in 2012, sales in 2013 got off to a strong start.
June sales came in at 8,239 units, according to the Vietnam Automobile Manufacturers Association (VAMA), a 41% increase year on year. Three consecutive months of strong double-digit growth highlighted the impressive comeback which sales have made in H1 2013 compared with the low base of 2012.
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Cumulative auto sales for H1 were 43,131 units, up 20.8% YTD. Having upgraded its sales forecast back in May, vehicle sales are well in-line to meet Business Monitor’s full-year bullish growth forecast of 8.7%, to over 85,000 units. The report excluded sales by Mercedes-Benz in the 2012 and 2013 forecast as the firm does not report a breakdown in its total sales by segment.
The series of interest rate cuts enacted by the central bank over the past year continues to ease credit in the economy and lower borrowing costs for both consumers and businesses. As lending rates have come down in tandem with the cuts in the State Bank of Vietnam’s (SBV’s) policy rates, borrowing costs for vehicle buyers have been lowered, benefiting both passenger car and commercial vehicle (CV) sales.
The report forecasts passenger car sales to grow 12.5% in 2013, to 48,000 units and CV sales to grow 4.0%, to 37,000 units.
Despite an outlook for production to enjoy small growth in the coming years, it warns that a lot needs to be done in terms of policy changes to make Vietnam an attractive market for autos related investment in the Asia Pacific region. Although the government has tried to increase domestic production in the industry, in particular by raising import tariffs on vehicles, there has been little in the way of rewards for companies which have chosen to invest.
This is reflected in the ‘rewards’ section of the report’s industry risk/reward ratings for the autos sector in Asia, where Vietnam scores far below its neighbours in terms of the industry rewards on offer.
Tariffs need to be lowered and kept consistent, road infrastructure needs to improve so as to incentivise people to buy cars and attractive investment policies need to be crafted, to attract foreign direct investment (FDI) from automakers. Until these reforms are in place, Business Monitor sees no reason to change its long term production forecasts.
