Low sales put firms on brink

Honda motorbike dealers have been surprising customers by selling their most-popular model, the Air Blade, at about VND1 million below the list price.

The situation is quite a turnaround from two months ago when customers often had to pay up to VND10 million above list to get their hands on one.

The dealers are blaming the sudden fall-off in demand for new motorbikes to the decline in consumer purchasing power over the past three months. The result has been a surge in motorbike inventories by as much as 40 per cent during the period, they said. And that figure is actually much lower than the figure for many other industries. According to the General Statistics Office (GSO), two-thirds of 136 tracked commodities saw accumulating inventories in the first eight months of the year. The stockpile index of the processing and manufacturing sector surged by nearly 17.8 per cent during the period, with the index for the wood products industry topping the list at 87.5 per cent, followed by beverages at 65.8, beer at 58.6 per cent, and footwear, animal feed, textiles and cement, all at around 40 per cent. Viet Nam Plastics Corporation deputy director Dao Duy Kha said that his firm had actively reduced total monthly imports of materials from 1,000 tonnes to 700-800 tonnes – even as stockpiled inventories rose by 20 per cent over the same period last year.

Viet Nam Association of Forestry and Wood Products general secretary Nguyen Ton Quyen said that demand for wood products had decreased sharply in the past quarter, following a price hike of 15-30 per cent which reflected the rising costs of raw materials.

Meanwhile, total retail sales of goods and services during the first seven months of the year increased by only 4.7 per cent nationwide to VND1,065.8 trillion (US$51.7 billion), according to the GSO.

Vu Manh Ha, an expert with the GSO’s internal economics department, said that people had tightened their pursestrings due to high inflation and were only spending money on essentials such as food, rent, electricity, water and fuel – all of which have seen substantial price hikes.

High inflation had driven down industry sales by 30-50 per cent, Quyen said.

Stockpiles rose even more rapidly as producers breached contracts signed earlier this year when raw material costs were far lower rather than deliver goods at a substantial loss, said Pho Xinh Furniture Co director Duong Quoc Nam.

Many companies were now giving up workshop premises, scaling down production and laying off workers, according to the Viet Nam Chamber of Commerce and Industry, which reported that up to 3,000 enterprises had closed their doors in the first half of the year. The chamber’s survey of the financial statements of 400 enterprises showed that most had posted losses during the period. Excessive inventories of goods, meanwhile, were devaluing the country’s industrial output and boded ill for the economy, and if the situation continued, many more firms would have to cut production or even shut down, the chamber said.

The Viet Nam Association of Forestry and Wood Products has estimated that 30-35 per cent of 2,000 wood processing firms nationwide have had to suspend production.

Viet Nam Plastics Association vice chairman Ho Duc Lam said over 400 plastics companies – 20 per cent of the industry – would have to close their doors as they were no longer able to afford the 40-per-cent hikes in the costs of raw materials or oppressively high interest rates. Meanwhile, there was little opportunity for domestic industry to make up for lost sales by boosting exports. Truong Thanh Furniture Co director Vo Truong Thanh, who attended a wood products fair in Las Vegas this month, also said that the prices of Vietnamese products were higher than those from rivals in China, Thailand, Malaysia and Indonesia that were offered at the fair. While the Government has taken a number of measures to support enterprises, including tax breaks, businesses said the best way would be to help them access bank loans at reasonable interest rates and to spur consumption.

Chamber of Commerce and Industry general secretary Pham Thu Hang said that the Government should devise a suitable price strategy on input costs such as electricity, fuel and wages to avoid shocks to enterprises from escalating input costs. – VNS

Tags: Honda Vietnam, Vietnam automotive, Vietnam automotive industry