Reducing pre-registration fees save the car market in Vietnam

The 50% support level on pre-tax fees is enough to save the Vietnamese car market. Photo: Phuong Lam.

Given the decline in all 3 criteria including purchasing power, domestic production, and imported car quantity in the Vietnamese auto industry in the early months of the year, many agencies have proposed to the government to extend the special consumption tax payment deadline for car manufacturing and assembly businesses and reduce the pre-tax fees by 50% for domestic cars.

The Vietnamese auto industry is in crisis

After a sharp decline in sales in the first month of the year, the Vietnamese car market experienced consecutive growth in the following 2 months before unexpectedly entering a downturn right at the beginning of the first quarter.

According to a report by the Vietnam Automobile Manufacturers Association (VAMA), the total car market sales in Vietnam in April reached only 22,409 units, a 25% decrease compared to March and a 47% decrease compared to the same period last year.

After the first 4 months of the year, domestically assembled cars recorded a total sales volume of 50,017 units, a 39% decrease compared to the same period last year. The total consumption of imported cars also witnessed a 16% decrease, reaching 42,784 units since the beginning of the year.

The decrease in purchasing power of the market has significantly hindered the car production activities in Vietnam. According to a report by the General Statistics Office, an estimated 109,500 cars of all types were manufactured in Vietnam during the first 4 months of the year, a 19.3% decrease compared to the same period last year.

Meanwhile, although the number of imported cars in the first 4 months of the year increased by 47.2% compared to the same period last year, reaching a total of 54,344 cars imported to Vietnam, the import volume in April alone reached 12,323 units, a 19.1% decrease compared to the quantity recorded in the last month of the first quarter.

Thus, in the early stages of the second quarter, the automotive sector in Vietnam has experienced a decline in all 3 criteria, including purchasing power, domestic production, and car import activities from abroad.

In particular, the decrease in sales is considered one of the main reasons leading to the slowdown in manufacturing and car import activities after a relatively bustling first quarter.

In light of this situation, many agencies have proposed policies to support car manufacturing enterprises, most notably reducing the pre-tax fees by 50% for domestic cars.

Will reducing the pre-tax fees be enough to save the market?

In the past, the Vietnamese car market was twice “saved” thanks to the preferential policy of reducing the pre-tax fees for domestically manufactured and assembled cars. From June 29 to December 31, 2020, and from December 1, 2021, to May 31, 2022, the pre-tax fees for domestic cars in Vietnam were approved by the government to be reduced to only 50%.

Thanks to the above policy, the car market in Vietnam showed significant signs of recovery. The total market sales increased compared to previous months, both for domestically manufactured cars and fully imported cars.

In fact, the potential of this policy in the second implementation phase lasted until the end of 2022, resulting in a record-breaking sales performance of the Vietnamese car market last year.

Therefore, many opinions suggest that continuing to implement the above-mentioned policy in the remaining period of 2023 would help stimulate the Vietnamese car market, increase sales, and contribute to bringing car production and import activities back to a stable trajectory.

However, the reality shows that even though the government has not yet implemented any preferential policies related to the pre-tax fees at the current time, many car manufacturers and dealerships in Vietnam still offer special incentives for certain car models or the entire product range in the form of supporting this cost for customers.

The 50% pre-tax fee reduction is a familiar program for Vietnamese customers from the beginning of the year. In addition, many dealerships also offer cash incentives in addition to the pre-tax fee support policy, leading to actual selling prices of many models being reduced by hundreds of millions of VND.

However, the sales volume in the Vietnamese car market has not truly accelerated during the period of deploying this program.

In conversation, a sales consultant at a Japanese car dealership said that if applied, the 50% fee reduction would be equivalent to a maximum of 42 million VND when customers choose to buy models with a listed price of 700 million VND.

Meanwhile, Thanh Bao, a sales representative at a car dealership in Ho Chi Minh City, shared that the number of customers interested and inquiring about purchasing cars has cooled down significantly compared to the same period last year.

“Probably due to the difficult economy, not many people are willing to spend a large amount of money to buy a car at this time,” Bao said.

Many car models have implemented 100% pre-tax fee incentives for several consecutive months to boost sales. Photo: Boi Ha.

A prominent example of this situation in the Vietnamese car market is the Honda CR-V. Although the Japanese SUV model continuously implemented a 100% pre-tax fee incentive program, its sales volume could not maintain a high level each month.

Hyundai Santa Fe cars manufactured in 2022, despite being discounted by up to 180 million VND at some dealerships, also couldn’t accelerate sales in April. Representatives of Hyundai only achieved a sales volume of 1,712 units since the beginning of the year, ranking second behind direct competitor Ford Everest with 3,263 units in the same period.

Nevertheless, many opinions believe that the market still needs a boost from the government’s preferential policy of reducing the pre-tax fees to some extent, in order to help car manufacturers and dealerships alleviate the economic burden caused by the continuous implementation of incentives for several months.

“When the above-mentioned policy is implemented, dealerships will be able to increase the level of incentives for customers without significantly affecting business results,” a salesperson anonymously shared.

Currently, many car manufacturers and dealerships are actively implementing incentive programs ranging from 50% to 100% pre-tax fee reduction for certain models or the entire product range in the Vietnamese market. Besides, customers who purchase cars also receive cash discounts and valuable gifts, including one-year physical insurance or genuine accessories.

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