HO CHI MINH CITY -- Automakers and dealers in Vietnam have been struggling for buyers and profitability in the first half of 2017, offering big discounts and promotions before tariffs on cars made within the Association of Southeast Asian Nations disappear next year.
At the Vietnam Motor Show 2017 in the first week of August, most of the vehicles showcased by the Vietnam Automobile Manufacturers Association were Japanese. Fuel-savers and inexpensive compacts stole the four-day show, now in its 12th year.
In addition to the Japanese marques, Chevrolet and Ford of the U.S. and Mercedes-Benz of Germany were also present. Do Thanh Auto, which assembles and distributes for South Korea's Hyundai, displayed 70 vehicles.
Overall imports of completely built up units in the first six months climbed 3.5% to 51,000 vehicles, but in value terms they declined 14.2% to $1 billion. The fall in value was attributed to more competitive imports from Indonesia and Thailand, which benefited from a 10% reduction in import duties over previous years.
Manufacturers and distributors have given priority to protecting their market shares. Heavy discounts and promotions have not always persuaded buyers, who have become more concerned about future resale values.
Businesswoman Ngoc Lan, 40, was checking out new seven-seat models at the show, but decided to delay replacing her old Toyota. "I don't want to see the price of my brand-new car drop some 100 million dong overnight," she said.
Like Ngoc, many potential buyers prefer to wait for the new tax regime to be implemented next year, introducing zero duties on vehicles manufactured within ASEAN. Tax breaks on cars with mid-range engines may also be in the pipeline.
The Ministry of Public Security recently added another purchasing deterrent, with fines and vehicle seizures for buyers failing to deposit original documents for car loans.
Despite significant price reductions and incentives this year, overall car sales in the first six months fell 1% year on year to 134,268 units. Sales of luxury cars from non-ASEAN countries, which carry up to 70% in import duties, were down 14% from last year to 4,500 units.
Although it posted a 40% increase in revenue, Haxaco, the official dealer for Mercedes Benz, saw a 43% fall in profits after a major rise in sales expenses.
During the first half of the year, Truong Hai Auto, the assembler of Mazda and Kia, posted 25.5 trillion dong ($1.12 billion) in sales, down 6% on the year, with pretax profit falling 36% to 2.4 trillion dong. Its market share slipped 3.4 percentage points to 38.1% in the same period, among members of the Vietnam Automobile Manufacturers Association.
Heavy promotions and discounts helped Toyota Vietnam lift its sales volume by 19%, increasing its market share from 18% to 22% by July, but the company has not revealed profit details.
Vietnam's auto industry is also still awaiting a new regulatory decree that was expected in July. With the market situation still uncertain, manufacturers are delaying signing up for more motor shows later this year.