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Auto market freezes, manufacturers consider scaling down production   2012-02-05 - VietNamNet

Despite the noisy sales promotion campaigns, the automobile market still keeps gloomy. Big automobile manufacturers have said they are considering scaling down the production.


Car sales agents and showrooms in Hanoi have opened again after Tet, but there has been no visitor these days. Analysts say that the automobile market has become frozen after the car ownership registration tax increased to 20 percent since January 1, 2012, and the car number plate granting fee increases to 20 million dong.

In order to stimulate the demand, automobile manufacturers and distributors have run a lot of sales promotion campaigns. Renault, BMW, GM Vietnam, Truong Hai and Vina Mazda, for example, have offered the prop up of 30-50 percent of the ownership registration tax. However, they all have admitted that the sales have fallen dramatically.

GM Vietnam sold 550 cars only in January 2012, just equal to 50 percent of the sales in December 2011 (1127). Ford Vietnam sold 500 cars in January, while the figure was 1100 in December. Toyota Vietnam sold 1520 cars in January, a sharp decrease from 2574 cars in December 2011.

As such, domestic automobile manufacturers have seen the sales decreasing by 40-50 percent.

In mid December 2011, when people rushed to buy cars to avoid the new higher tax rates effective as of early 2012, the cars were in high demand. At that time, buyers had to pay 20-40 million dong more to buy a Toyota car. Meanwhile, the price of the car has just dropped by 20 million dong.

Imports have also been left unsold, even though the car dealers have slashed the sales prices by thousands of dollars. According to the Ministry of Industry and Trade, the import turnover of vehicles and parts dropped by 94 percent. In the last three months of 2011, the car imports also reduced significantly with just 2500-3000 cars imported a month, worth 45-50 million dollars.

The sharp fall in the sales has raised big worries to automobile manufacturers, because this is not the temporary decline. The overly high ownership registration tax and the number plate granting fee have been blamed on the slow sales.

The manufacturers have been warned that 2012 would be another difficult year for them. The economic difficulties would force people to cut down their spending. Meanwhile, commercial banks have said they would restrict the disbursement to those who borrow money to buy cars. Other banks still provides consumer loans, but set up very high interest rates of up to 23 percent.

Akito Tachibana, General Director of Toyota Vietnam, anticipates that the automobile market would be narrowed by the decision of the Hanoi and HCM City local authorities to raise the car ownership registration tax.

He said that the difficulties in 2011 would bring consequences in 2012. Besides, the economic downturn, the tightening of the monetary policies and dong/dollar fluctuations would also have negative impacts on the automobile market in 2012.

It is expected that the sales of the member companies of the Vietnam Automobile Manufacturers’ Association VAMA would decrease by 20 percent.

Some foreign invested automobile manufacturers said that if the sales go too slowly, they would have to consider scaling down the production and cutting down the labor force. Currently, the 18 members of VAMA are generating 60,000 jobs, including the labor force of the companies that provide car parts and sales agents.

Once the automobile joint ventures cut down production, a lot of jobs would be cut, which would have a domino effect to car parts providers in Vietnam and sales agents, according to VAMA’s secretary general Pham Anh Tuan. Seasonal workers would be the first workers to be laid off.

In 2008, when the world’s economy witnessed a crisis, automobile manufacturers in Vietnam such as Toyota, Honda and Ford had to cut down the labor force. Meanwhile, the difficulties in 2012 are believed to be more difficult than in 2008.

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