What medicine will ‘save’ the Vietnamese automobile market?

Troublesome Start for Vietnam’s Auto Market

The first two months of 2024 have proven challenging for Vietnam’s automotive market, with sluggish consumer demand persisting. The slow start for the entire sector presents significant hurdles for automakers and dealerships alike, leaving open the question of potential solutions to “rescue” the Vietnamese car market.

Efforts by Automakers and Dealers

According to a report by the Vietnam Automobile Manufacturers Association (VAMA), the Vietnamese market recorded a total sales volume of 30,876 units in the first two months of the year, comprising 16,445 domestically assembled vehicles and 14,431 completely built-up imports.

Compared to sales figures for the same period last year, total market volume has declined by 9,478 units, representing an approximate 23% decrease in overall consumption.

The unfavorable sales trends from the start of the year have compelled automakers present in the Vietnamese market to adopt specific measures to adapt swiftly.

Initially, Toyota, Mazda, Hyundai, and Mitsubishi announced price adjustments for a range of cars in the Vietnamese market, including models recently launched or soon to reach customers.

Among these, the urban SUV segment has witnessed the most price adjustments, with Toyota Yaris Cross, Mitsubishi Xforce, and Hyundai Creta all receiving price reductions by their respective manufacturers. Nissan has also introduced a preferential registration fee for Kicks, combined with exclusive promotions from dealerships, bringing the starting price of the gasoline-electric SUV to 658 million VND.

Mitsubishi Xforce, despite not yet being officially released, has received a price adjustment to stimulate demand. Photo: Vĩnh Phúc.

Moreover, Mitsubishi announced a 50% discount on registration fees in March for its entire vehicle lineup in Vietnam. For Xpander Cross and Outlander, customers will also receive a complimentary 360-degree camera worth 20 million VND upon purchase, applicable to vehicles produced in 2023 and 2024.

Honda has also introduced incentives of up to 100% registration fee waivers for Honda CR-V and Honda City L and G versions produced in 2023. For Honda City RS, Honda HR-V, Honda Civic, and Honda Accord, customers purchasing in March will receive 50% registration fee assistance, along with gifts from dealerships.

Vietnam Suzuki has announced incentives of up to 100% registration fee waivers for all passenger vehicles in the Vietnamese market. The highest discount value of 89 million VND applies to the Suzuki Ertiga Hybrid MT, while the lowest discount of 40 million VND is applicable to the Suzuki Swift. Vietnam Suzuki’s website indicates that all gifts can be converted into cash.

In addition to adjusting prices and offering incentives to support customers, automakers have also actively adjusted supply amidst the relatively slow start for Vietnam’s auto market.

The General Statistics Office’s report reveals that in the first two months of the year, Vietnam produced an estimated 37,500 vehicles of various types from domestic assembly lines, representing only 90.2% of the volume achieved during the same period last year.

Domestic auto supply shows signs of adjustment to adapt to the general situation. Photo: Việt Linh.

The import of completely built-up automobiles has also been adjusted to align with the market’s overall situation. According to the General Department of Customs, 16,452 completely built-up automobiles of various types completed customs clearance procedures in Vietnam in the first two months of 2024, with a total value of over USD 345 million.

Compared to the same period last year, imported complete built-up automobiles have decreased by 38.5% in volume and 39.7% in total value. The decline in auto imports is unsurprising, as economic headwinds are impacting auto demand, prompting distributors to adjust accordingly.

Anticipating Further Stimulus

Despite current efforts by automakers and dealerships, Vietnam’s auto market is expected to encounter significant challenges throughout the remainder of 2024.

One of the primary obstacles for car buyers is initial financial constraints, often addressed by installment auto loans. In reality, interest rates for car loans at banks currently hover at attractive levels.

Our research indicates that loan packages currently allow car buyers to secure interest rates as low as 6% per annum and as high as 8% per annum during the initial loan period. Despite the relatively favorable interest rates, overall consumer demand in the Vietnamese car market has yet to show promising signs.

Attractive auto loan interest rates have yet to stimulate market demand. Photo: Bối Hạ.

Therefore, the current market downturn requires more than just the efforts of automakers; it also necessitates government support, similar to the successful registration fee incentives implemented several times in the past.

Recall that last year, Vietnam’s auto market experienced a 51% drop in sales at the start of the year before recovering in the subsequent two reporting periods, only to witness another decline in sales during April and May 2023.

At the time, the policy of 50% registration fee support for domestically assembled automobiles, once approved, became an effective solution, aiding the Vietnamese car market’s recovery from June onwards before experiencing relatively stable growth in the second half of 2023.

Throughout the duration of the registration fee incentives for domestically produced vehicles, spanning from July to December 2023, the Vietnamese auto market achieved total sales of 164,664 units, with a peak of 38,740 units recorded in the final month of last year. Comparatively, total sales in the Vietnamese car market during the first six months of 2023 stood at only 137,327 units, approximately 27,340 units less than the period marked by positive developments due to the government’s registration fee support program.

Market sales improved after the implementation of the registration fee incentive program.
Comparison of Vietnamese car market sales before and after the implementation of the registration fee incentive in 2023 (Data: VAMA)
Label	First 6 months of 2023	Last 6 months of 2023
	Units	137327	164664

Thus, the registration fee support policy for domestically assembled vehicles has generally had a positive impact on overall demand in Vietnam’s auto market. Given the current situation, could a similar policy become an effective “antidote” to revive the Vietnamese auto market, which is experiencing a relatively slow start?

Furthermore, with the growing popularity of hybrid vehicles in Vietnam, akin to the global trend, specific incentives for this segment and electric vehicles in general should be considered to simultaneously stimulate the Vietnamese auto market and contribute to environmental protection.

Currently, automakers continue to actively implement promotions and incentives similar in form to the registration fee support program previously implemented by the government for domestically produced vehicles. However, sales figures for individual automakers and the overall market have yet to show signs of improvement.

VAMA’s latest report indicates that total market sales in February declined by 40% compared to the previous month. Specifically, 11,633 units were sold in Vietnam during the month, comprising 6,662 domestically assembled vehicles and 4,971 completely built-up imports.

Compared to last year, Vietnam’s auto market is experiencing a more negative trend, with two consecutive months of significant sales declines. The sluggishness in the Vietnamese car market is likely to persist for much of the remaining period of 2024.