New vehicle sales in Vietnam fell by 21% to 20,643 in August 2023 from 26,267 units a year earlier, according to wholesale data released by the Vietnam Automotive Manufacturers Association (VAMA).

The market accelerated to the downside last month, extending a decline that began in the fourth quarter of last year following an initial rebound from the Covid lockdowns earlier in the year.

Despite the long awaited return of international tourism, Vietnam’s recovery from the pandemic has slowed sharply this year with GDP growing by 3.7% in the first half compared with 8% in all of 2022.

The central bank reversed some of last year’s interest rate hikes in the second quarter of 2023, cutting its benchmark rate to 4.5% from a peak of 6% to help stimulate domestic consumption. The finance ministry also cut vehicle registration tax by 50% at the beginning of July until the end of the year to help support domestic vehicle manufacturers which are also offering discounts to stimulate sales.

Vehicle sales in the first eight months of 2023 were down 30% at 166,137 units from 236,194 a year ago, with deliveries of passenger vehicles plunging 34% to 125,438 units while commercial vehicle sales dropped 14% to 40,699.

The association’s data did not include some key brands, including Mercedes-Benz, Hyundai, Tesla and domestic startup VinFast, which together accounted for an estimated 23% of sales last year.

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Truong Hai (Thaco) group, the local assembler and distributor of Kia, Mazda, Peugeot and BMW-Mini and a major player in the commercial vehicle segment, reported a 38% plunge in group sales to 58,042 units year to date (YTD). This included a 45% drop in Kia sales to 24,120 units; an 18% fall in Mazda sales to 20,256 units; and an 80% plunge in Peugeot sales to 1,616 units; while Thaco truck sales were down by 35% at 9,891 units.

Toyota sales fell 38% to 34,372 vehicles YTD with the Hilux pickup truck and Hiace light van still largely absent. This benefited Ford which reported an 85% jump in sales to 23,366 units thanks mainly to strong demand for its locally made Ranger pickup truck while Mitsubishi sales fell 27% to 18,783 units; Honda 12,516 units (-49%) and Suzuki 9,051 units (-11%).

Separate reports suggested Hyundai sold 34,800 vehicles YTD, making it the country’s leading vehicle brand just ahead of Toyota, while VinFast sold 14,700 units in the first seven months of the year.

A number of foreign brands recently announced plans to sell electric vehicles in Vietnam which will inevitably put pressure on VinFast as well as established foreign brands.

BYD said it planned to build an EV plant while Hyundai launched the Ioniq 5 in May and Mercedes-Benz said it would introduce three EVs this year. Great Wall Motor also launched its Haval H6 hybrid SUV last month.

The Ministry of Finance is considering providing an additional US$1,000 EV purchase incentive in addition to the existing registration fee exemption, as part of a package to attract EV production to the country that would also include reducing import taxes on EV components and charging equipment.