Import car market frozen ‘cause of low demand’

The Ministry of Industry and Trade has applied some measures to “untie” car imports, but the car market remains gloomy.

Auto dealers now focus on selling the cars they imported before, while they dare not place new import orders.

Market lackluster in high sale season

The car market has become nearly frozen. In July and August, some showrooms in Hanoi were locked, dormant with no cars on display; while others were full of unsold cars. The supply of brand new imports has been cut with the issuance of the Circular 20, which requires the importers to show the documents which prove to be unattainable for them. Meanwhile, used cars also do not come any more because of the higher tariffs.

Hung, Director of the Tay Bac Automobile Company, has confirmed that there have been no new imports after the Circular 20 was promulgated. “Hundreds of brand new car imports got customs clearance after June 26, but the import orders were placed prior to June 26, the date when the circular took effect,” he explained.

However, there has been no information about the sale of the imports. It is highly possible that car dealers have to offer big discounts to boost the sales of the import models which are not favorable on the market now.

The car demand is now surprisingly low, partially because it is now the month of forsaken spirits of the lunar year, and people believe that they would be unlucky with their business deals in the month.

However, Mai Lan, an executive of Hoang Gia Auto has been blamed the slow sales on the low demand. “Commercial banks have tightened the lending; therefore, people do not have money to buy cars. Meanwhile, those who have idle money, would rather use their money to buy gold or real estate than buying cars while the car prices are really high,” Lan said.

As planned, the vehicle ownership registration tax will increase by 20 percent in October. In principle, it is now the right time for people to rush to buy cars to avoid the higher registration tax. However, the market remains quiet; people do not rush to buy cars now because cars are getting too expensive, while the high inflation forces people to fasten their belt.

Most car dealers have complained about their bad business performance. Previously, in normal business conditions, big car companies in Hanoi could sell 80 cars a month, while the number has dropped to 20, and the sold cars are mostly the ones imported prior to June 26.

Used cars have no way to enter Vietnam

Just several months ago, when car dealers were told that they would have to shift to other kinds of business because the new regulations have blocked all accesses, they replied that in this case, they would trade used cars instead of brand new cars.

However, their plan could not become realistic. Just 45 days after the Circular 20 on brand new car import was released, on June 29, the Prime Minister decided to raise the import tariffs on used cars sharply.

Under the new decision, since August 15, used imports have to bear both the percentage tax rates like brand new imports, and the fix sums of tax. Only the small car models with the cylinder capacity of less than 1.5 L and 10-15 seat cars luckily escape from the tariff increases. Therefore, car dealers now have only one choice – importing small car models which are mainly South Korean ones such as Kia Morning. Now Truong Hai and Hyundai Thanh Cong act as the official distributors of the models.

Lan said that previously, only several car dealers traded South Korean cars. Meanwhile, the number of such dealers has increased by several times. As a result, car dealers have to compete fiercely with each other, which has forced the competitors to force the prices down.

Car dealers all say they have never before faced such big difficulties like now. Meanwhile, analysts have anticipated that many car dealers will have to shut down showrooms and shift to other kinds of business.

Tags: Vietnam automotive, Vietnam automotive industry, Vietnam autos market, Vietnam car imports