Abstract
Vietnam' s automotive industry still suffers from fluctuating tax rates, which
bring instability to the
market. After a spike in sales in March, brought
about by a consumer rush to avoid the higher Special
Consumption Tax (SCT)
introduced on April 1, new vehicle purchases plummeted as the tax took
effect.
The result was that by the end of H109, sales were down 30%
year-on-year (y-o-y). However, monthly
sales suggest that the market is
slowly adjusting to its new tariff regime, as sales for May rose 13%
compared to April, followed by a 10% increase in June compared to May.
Moreover, sales for June were
only 1% lower y-o-y.
Manufacturers are
still attracted to Vietnam as a production base. Nissan Motor will continue
plans to
open a production plant in Vietnam, despite the current market
slowdown. The company expects to have
its first domestically produced
model on the market in 2010, although details of the model and capacity
are not yet available. Nissan believes the Vietnamese autos market is not
contracting as much as in other
countries, and expects it to be returning
to growth by the time its production operations begin. BMI
would agree, as
we forecast an 18% decline in sales of domestically produced vehicles in 2009,
followed
by growth of 12% in 2010.
Vietnam remains in 10th place in
BMI' s Business Environment Ratings, with very little change to its
score
from the previous quarter. Although the market achieves a high score of 85.0
for its low market
risk, the autos industry itself scores a below average
45.0. Fluctuating tax rates will do little to help this,
as Toyota Motor' s
plea to the government to rethink the priority vehicle segment for tax
increases
proves. The Japanese firm has invested heavily in raising the
local content of its Innova MPV, but
because the model falls into the six
to nine-seat category that falls into the higher tax band, the price has
been increased. Sales are falling and Toyota is left to consider whether it
can justify the cost of local
production.
Toyota retained its market
leadership in H109 despite a 13% drop in sales. Elsewhere, there were signs
of
an upturn by end-H1, however, as seven manufacturers achieved positive
growth in June compared with
three in May and one in April. Vietnam Motor
Corporation (VMC), representing BMW, Kia Motors,
and Mazda Motor, achieved
growth of 230%, while Vinacomin and Vinaxuki recorded respective
growth
rates of 147% and 142%. Toyota continued to lead the market with a 22%
share.
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