Dollar values increase, car dealers threaten to bump up prices

The sharp increase in the value of the dollar has prompted car dealers to seriously consider price hikes.

On March 2, the dong/dollar ratio announced by the State Bank of Vietnam was 18,554 dong per dollar. At Vietcombank, the biggest foreign currency trader, the purchase and sale price were 19,050 and 19,100 dong per dollar respectively.

As such, the Vietnam dong has lost 1,500 dong per dollar in value since November 25, 2009.

In late November 2009, car manufacturers and distributors had to raise prices of some car models because of the more expensive dollar. Now, the sharp increase in the dollar is called “unbearable” as car dealers are forced to alter production plans and raise prices.

“When the dollar price increased in November, many car dealers tried not to raise sale prices and accept lower profits. They will not be able to bear any further price increases,” asserted a director of a car distribution company.

According to the car dealer, when importing a car at $20,000 now, the price after taxes and fees are added will be 50 million dong higher than in December 2009. Plus, the value added tax has been raised from five to 10 percent since the beginning of 2010.

Car importers suffer more than domestic manufacturers from the dollar price increase, because they must pay all expenses in dollars, except those that import cars from European countries and pay in Euros.

Thoi Bao Kinh Te Vietnam has quoted sources that claim all car dealers are pondering increased car prices to cover their losses. Car dealers argue that the price increases would be lower than they need to be to cover the actual impact of the dollar increase. They hope to avoid buyer shock, as car shoppers no longer enjoy exemption from the value added tax and ownership registration tax. Car dealers understand that if they set overly high prices, their cars will be unsellable.

Also because of the dong/dollar exchange rate increase, financial analysts forecast a decrease in auto imports during the upcoming months since cars have become more expensive.

The General Department of Customs has estimated a 26.5 percent decrease in car imports in the complete built unit (CBU) category for February in comparison with January 2010.

Some 2,500 cars imported in February 2010 are worth $39 million, far below rates for January with 3,400 cars valued at $55 million.

VietNamNet/TBKTVN

Tags: Vietnam auto prices, Vietnam auto sales, Vietnam automotive, Vietnam automotive industry, vietnam car