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Vietnam's automotive industry still suffers from fluctuating tax rates, which bring instability to the market. After a spike in sales in March, brought about by a consumer rush to avoid the higher Special Consumption Tax (SCT) introduced on April 1, new vehicle purchases plummeted as the tax took effect.
The result was that by the end of H109, sales were down 30% year-on-year (y-o-y). However, monthly sales suggest that the market is slowly adjusting to its new tariff regime, as sales for May rose 13% compared to April, followed by a 10% increase in June compared to May. Moreover, sales for June were only 1% lower y-o-y.
Manufacturers are still attracted to Vietnam as a production base. Nissan Motor will continue plans to open a production plant in Vietnam, despite the current market slowdown. The company expects to have its first domestically produced model on the market in 2010, although details of the model and capacity are not yet available. Nissan believes the Vietnamese autos market is not contracting as much as in other countries, and expects it to be returning to growth by the time its production operations begin. BMI would agree, as we forecast an 18% decline in sales of domestically produced vehicles in 2009, followed by growth of 12% in 2010.
Vietnam remains in 10th place in the Business Environment Ratings, with very little change to its score from the previous quarter. Although the market achieves a high score of 85.0 for its low market risk, the autos industry itself scores a below average 45.0. Fluctuating tax rates will do little to help this, as Toyota Motor's plea to the government to rethink the priority vehicle segment for tax increases proves. The Japanese firm has invested heavily in raising the local content of its Innova MPV, but because the model falls into the six to nine-seat category that falls into the higher tax band, the price has been increased. Sales are falling and Toyota is left to consider whether it can justify the cost of local production.
Toyota retained its market leadership in H109 despite a 13% drop in sales. Elsewhere, there were signs of an upturn by end-H1, however, as seven manufacturers achieved positive growth in June compared with three in May and one in April. Vietnam Motor Corporation (VMC), representing BMW, Kia Motors, and Mazda Motor, achieved growth of 230%, while Vinacomin and Vinaxuki recorded respective growth rates of 147% and 142%. Toyota continued to lead the market with a 22% share.
Vietnam Autos Report Q4 2009: http://www.companiesandmarkets.com/r.ashx?id=66O882623155770
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