Scarcity hits Vietnam automobile market ahead of Tet holidays

Although import tariffs of automobiles from countries in the ASEAN had been cut to zero percent and the number of imported automobiles as well as domestically-assembled ones has seen good growth, there is still scarcity in automobiles supply, causing an increase in prices, especially of hot models.

Cars waiting to be handed to buyers at a parking lot in Hiep Phuoc Industrial Park. (Photo: SGGP)

Cars waiting to be handed to buyers at a parking lot in Hiep Phuoc Industrial Park. (Photo: SGGP)

The total number of imported cars in the whole country merely reached 12,380 cars in the first six months of last year, a sharp decline of 75.7 percent in volume and 68.3 percent in value compared to the same period of 2017. However, after Decree 116/2017/ND-CP to specify the regulatory conditions and licenses for automobile manufacturing, assembling, importing and maintenance and warranty services took effect, the number of imported cars had strongly rebounded in the last months of 2018.
Domestically-assembled cars still kept good growth by the end of 2018. However, at this time when it was about three weeks ahead of Tet holidays, whoever wanted to buy car had to wait a very long time before receiving their cars. If anyone wants to receive their cars before Tet, they have to pay an extra amount of money of up to hundreds million of Vietnamese dong.
According to car salesmen, most cars are currently sold with “accessory”. These “accessory” packages vary from VND70 million to VND150 million, depending on model and version of cars. For those who are wealthy, they are willing to spend more money to get their cars soon. But for those who have tighter pocket, even after Tet holidays there is little chance that they will be able to buy a car at listed price.
The list of cars with “accessory” packages includes Toyota Fortuner, Toyota Rush, Toyota Land Cruiser Prado, Ford Everest, Ford Ranger Raptor and Honda CR-V. Although Mistubishi Xpander cars are announced to sell at the listed price and customers have to wait for their cars in accordance with the order of deposit, some salons still suggest customers to pay an extra amount of money of around VND30 million to get their cars soon.
Generally, most car agencies said that customers had to wait until March this year to get their cars if they signed purchase agreement in November last year. If anyone wanted to get their cars before Tet, the only way was to buy the contracts which were signed two months ago. According to car salesmen, each agency only receives around twenty cars of all versions every month, sometimes just a few cars while the current demand for cars is two to three times higher; hence, car supply cannot meet the demand.
According to Tran Thanh Binh, director of Thanh Binh Automobile Trading Service Company in District 12, there was a shortage in car supply because automobile firms had temporarily halted orders from factories in Indonesia and Thailand due to difficulties in importing cars at the beginning of last year. In the last half of 2018, when all the issues were resolved, automobile firms then have resumed orders. However, factories also make cars for other markets, not only for Vietnam so there are not many cars to import.
With the current situation, it is difficult for automobile market to see a drop in price. Especially, at the time near Tet holidays when the demand for buying car is high. The price adjustment is only applied on cars with poor sales. Not to mention that automobile market in Vietnam is expected to experience fluctuations as some drafts are under consideration, such as increasing registration fees for pick-up trucks and imposing property tax on cars worth over VND1.5 billion.
According to Dr Tran Van Cuong, economic expert from the Vietnam National University Ho Chi Minh City, if the draft is passed, consumers will have to pay the first registration fee 3-4 times higher than at present which means that the prices of many car models will strongly go up. However, it is expected that when the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) becomes effective, import tariffs of cars from 11 countries in the CPTPP into Vietnam will be downed to zero percent and vice versa.
Among countries in the CPTTP, Vietnam is currently importing cars from Japan and Canada. After the agreement was signed, consumers hope that car prices will drop heavily in the near future. However, many consumers are not optimistic about this prospect as earlier car prices remain high though import tariffs from ASEAN countries cut down to zero percent.

By Lac Phong – Translated by Thuy Doan

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