Car dealers slash prices despite VAT

Contrary to all predictions, car prices have not increased as expected, even though the VAT has returned to 10 percent since January 1, 2010. Car dealers have even had to drop prices to boost sales.

Import car prices down

A Toyota Camry imported from the US is now selling at $57,000, or $3,000 less than in December 2009.

Most top models have unchanged prices compared with previous months, when taxes were lower. The Toyota Camry 2.0, imported from Taiwan, is still selling at $48,800, while the Lacetti imported from Taiwan $29,500.

Pham Van L, a showroom salesman in Hanoi, complained that the car market in January 2010 is too gloomy.

L. sold 7-8 cars in November, but since then he has not made a sale.

The car market has quieted since December 2009. After December 31, 2009, when VAT tax and ownership registration tax preferences terminated, car dealers rushed to slash prices by $1,000-2,000 in order to sell cars.

The sale prices have not helped much, which explains why many of Hanoi’s automobile showrooms are still full of cars.

Now auto importers have too much in stock. Nguyen Anh T, who claims a close relationship with car importers, explained that car importers did not anticipate this situation.

“Purchasing power became weaker in December 2009, but many importers still took on cars in large quantities,” he noted.

For example, tn the case of US-sourced Toyota Camry and Venza models, the T.T.N showroom imported 40 cars, while MT showroom did the same.

Declining to reveal the name of the importers, T. said that he knows a big company in Hanoi that imported 100 cars in December 2009 alone. Smaller showrooms also took on 15-20 cars.

T. agreed that, with the current weak purchasing power, each large dealer has 50 cars unsold, while smaller ones have 10 to 12.

The original price of a Camry is about $20,000, while Venza is priced at $21,000. If a showroom has 50 unsold cars, this means that it has one million dollars “buried” in car import deals. The figure would be $300-350,000 for smaller dealers.

“Car dealers now suffer bitterness because they did not have reliable predictions,” he observed. “They put high hopes on “car fever,” which only lasted through October and November.”

Domestically-made car prices rise and fall

In November and December 2009, car buyers heard they would not get their cars before Tet. Now car dealers say they can hand over cars before Tet, even though Tet will arrive in less than three weeks.

Unlike imported cars, the prices of domestically-made cars have been raised following the VAT increase. Toyota, for example, has raised prices by 20-60 million dong per car, and Ford by 25-40 million dong.

Yet while charging higher prices on cars, sellers are applying flexible policies to lure more buyers. Nguyen Thanh C., a salesman of Ford Thang Long, confirmed that they will refund $200 to buyers of the Focus model. He also maintained the buyers with January contracts will receive their cars before Tet.

Honda raised prices by 20-40 million dong, but the manufacturer offers a rebate of five million dong per car.

Tags: Vietnam auto prices, Vietnam automotive industry