Vietnam Car Sales Heat Up

But netizens bemoan lack of investment in sector.

Since January of this year, sales of imported cars in Vietnam has been booming. Much of the increase has been seen as a result of a relaxation of tax cuts announced in March 2013 and implemented in January 2014 for vehicles built in the ASEAN trade zone, as a part of the ASEAN Trade in Goods Agreement (ATIGA). The implementation of the agreement means that consumers will pay 50% to 60% less tax on cars manufactured in and imported from ASEAN countries.

The streets of Vietnam are currently famous for traffic jams of small motorbikes and scooters, but it is feared that the pace of car ownership increment will choke the already clogged streets. Head of the Transport Department, Khuat Viet Hung, recently revealed a study in Hanoi showing that although the number of cars is only 10% that of motorbikes, they occupy 55% of the road space and 60% of the parking spaces. But owning a car is still the dream of most people in this rapidly developing South East Asian nation.

In the month of May 2014, a total of 6000 cars were imported, a significant number when compared to the total of imported cars for 2013, which was 34,500. In much of South East Asia, cars are classified as CKD, meaning assembled or manufactured in the country they are sold in, or CBU, meaning imported into the country as a finished vehicle. In 2013, there were a total of 110,500 new cars shipped in the territory and of these, about 32% were classified as CBU or imported.

Industry analysts believe that the Vietnamese car market will eventually ship more than a million new cars each and every year. However, many in the Vietnam Automobile Manufacturers Association (VAMA) bemoan the perception that domestically-produced cars are of an inferior quality and are indicating that the government may well have to come to their aid should they want to continue with a domestic car manufacturing industry. Vietnamese bloggers are becoming increasingly critical and, in some cases, nationalistic about the car industry. Many point to a small start-up company called HENG in Cambodia, Vietnam’s poor neighbour, which surprised the region when they introduced a domestically-developed and manufactured EV. The car is operated by smartphone and RFID, and is capable of reaching 60kph - all for a price of US$10,000. The message goes: “If they can do it in Cambodia without any help then why can’t we do it here?”

The bloggers point out that despite the years of positive government support towards the development of the car manufacturing industry, companies such as Ford, Mazda and Toyota have all cancelled projects in Vietnam recently due to a lack of local parts for the assembly process. This is despite the fact that there are 210 car accessory manufacturers in Vietnam and these are mostly JV’s with either Japanese or Korean partners. Currently, and after 20 years of developing the industry, most locally-assembled cars still only have a modest 10% locally-manufactured content.

image: bestsellingcars.com