New vehicle sales in Vietnam rose by 3.6% to 20,044 units in July from already weak year earlier sales of 19,345 units, according to member data released by the Vietnam Automotive Manufacturers Association (VAMA).

Despite strong economic growth in the country, estimated at 7.1% in the first half of 2018, the vehicle market is struggling to recover from last year's decline. Sales in the first seven months of the year were 1.2% lower at 143,104 units compared with weak year-earlier sales of 144,835 units.

Regulatory changes introduced by the Vietnamese government at the beginning of the year have affected the flow of vehicle imports into the country, despite import tariffs also having been cut to zero on vehicles originating from neighbouring ASEAN countries.

While the market still anticipates cheaper vehicles as a result of the tariff cuts, delays at customs due to new standards and procedures have reduced imports from Thailand and Indonesia to a trickle.

The governments of these countries claim these delays are effectively new non-tariff trade barriers on the part of Vietnam, replacing the tariff cuts. Without any protection, however, Vietnam knows its auto industry would struggle to compete.

At the beginning of August the Thai government said a visiting trade delegation from Vietnam agreed to proposals for a mutual recognition agreement (MRA) on automotive standards.

The delegation said it would put these proposals to Vietnam's Transport Ministry for final approval, which if accepted would mean Vietnam would recognize vehicle tests carried out in Thailand instead of Vietnam - thus speeding up imports.

While sales of passenger vehicles in Vietnam increased by 13% at 96,454 units in the January-July period, commercial vehicles sales fell by over 21% to 46,650 units. The pickup truck segment, which includes significant imports from Thailand, shrank by more than half to 6,522 units according to VAMA data.

Truong Hai (Thaco) group, the local assembler and distributor of brands such as Kia, Mazda, Peugeot and Hyundai and a significant player in the commercial vehicle segment, reported a 5.8% year-on-year rise in group sales to 57,906 units in the first seven months of the year.

Mazda sales alone were up by almost 28% to 18,919 units, while Kia sales rose by over 18% to 16,268 units.

Toyota remained the leading vehicle brand in the country over the seven-month period, albeit with sales falling by close to 12% to 30,020 units, while Honda's sales almost doubled to 13,095 units. Ford's sales fell by almost 35% to 10,986 units and GM's were 7.5% lower at 6,045 units.

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