An effective solution
Like many other manufacturing and business industries, in early 2020, the Covid-19 pandemic caused the production and business activities of car companies to fall into difficulty.
In the first six months of the year, instead of growth (at an average of over 20%), sales of the whole auto market decreased by 31% compared to the same period last year. Some businesses said if this situation lasts a few more months, some firms will fail.
At the end of June, the Prime Minister signed Decree No. 70 stipulating the registration fee rate for domestically manufactured and assembled cars will be reduced by 50% in 2020, taking effect on June 28 to December 31 (for cars with less than 9 seats, customers in Hanoi only have to pay 6% of the registration fee, in HCMC it is 5%).
This policy helped the automobile market, with the sales of the firms, especially car manufacturing enterprises, seeing a change. Except for August as the sales decreased because of the Wandering Souls’ Month, the sales in July and September all increased compared to June. By the end of nine months, the industry’s sales decreased by 21% compared to the same period in 2019, a much lighter decrease compared to the first six months (31%).
Following that momentum, the October result is considered a miracle when it achieved a record growth of 22%, (the highest level in the past five years), despite the Covid-19 pandemic returning in Vietnam. In the top 10 bestselling cars in October, assembled vehicles accounted for eight products. November continued to see strong sales in the market, growing 10% compared to the previous month and 25% compared to the same period last year.
In fact, the 50% reduction in registration fee policy is direct support for consumers, and the amount is not too high for popular cars (in the small segment, car prices range from VND400 million – VND700 million, car buyers can save VND20-30 million). But this policy has a strong impact on consumers’ psychology, so that the fear of not making big purchases in the context of the pandemic and difficult economic situation is removed, thereby increasing sales volume of manufacturing enterprises, helping agents push inventory.
This support policy of the Government is only applicable to domestically manufactured and assembled vehicles, but in order to compete, many imported cars also applied a 50% reduction in registration fees for domestically assembled cars. Even some models such as Honda CR-V or Volkswagen cars are also supported by distributors 100% with registration fee for buyers.
Analyzing the market, the business director of a large car company said: Vietnam’s car market has its own operation times, not according to supply and demand, as well as economic laws, but according to psychology. That’s why, at the end of the year, in order to buy a car for Tet, many customers accept to pay at a high level, up by VND100-200 million compared with the price announced by the company; or are forced to buy a bunch of spare parts attached. For example, at the end of 2019, many models, in order to be received before Tet, the price was higher than the announced manufacturer up to a hundred million VND such as: Hyundai Santafe, Honda CR-V, Toyota Fortuner and Ford Explorer.
However, there are also firms and agents that buy at an unfair price when gathering goods for the peak season at the end of the year (usually customers rush to buy a car), but the market is frozen waiting for a discount. That is the situation of the end of 2017 when customers waited for the change in car prices in 2018, car import tax in the region to 0% as committed and Decree 116/2017/ND-CP defines the conditions for imported vehicles.
Waiting for a new impact
Recently, the Ministry of Finance has submitted a report to the Government with the view that it is proposed not to extend the discount of 50% of the registration fee for domestically produced cars (until January 1, 2021).
The Ministry of Finance estimates that, in order to save the automobile industry, the policy of 50% reduction in the registration fees of domestically produced cars under Decree 70 (implemented from June 28) reduced the state budget revenue by about VND3,700 billion.
At the same time, during the implementation process, the embassies of some countries such as Indonesia, Thailand and Eurocham have commented and met with the Ministry of Finance to claim discrimination between imported and domestically produced vehicles.
On the other hand, according to the representative of the Ministry of Finance, this is just a “short-term solution” to solve difficulties for domestic automobile manufacturing and assembling enterprises under the impact of the pandemic. This solution basically completed its task, so it is no longer necessary.
This is just a proposal of the management agency, waiting for the Government to decide, but immediately, this information has a strong impact on the auto market.
The auto market in the last month of the year became very active, even some models sold out of locally assembled models such as VinFast Fadil, KIA Seltos or Kia Sorento were witnessing excessive demand.
Currently, many cars produced and assembled domestically, dealers and manufacturers will not receive more delivery orders this year, such as Mercedes-Benz GLC or the two best-selling models of TC Motor, namely Hyundai Grand i10 and Accent.
Although Kia Vietnam has continued to sign a contract to order the Kia Seltos, the delivery time is expected before the Lunar New Year, but not in December 2020.
Talking to reporters from Customs Newspaper, a representative of THACO company, the distributor of KIA products, said: the enterprise has tried its best to meet customer needs and production volume has increased by 15-20% compared to the previous period, but due to the pandemic, the order and transportation of components and spare parts for production was interrupted, so it could not meet the needs of customers.
This person revealed “it is ready to assist customers with the registration fee if the customer has not yet received the car after the time given preferential treatment by the Government”. The problem is that customers insist on taking the car before Tet, not entirely because of the reduced registration fee.
The year 2020 is ending, car sales of the domestic market are forecasted to continue to increase strongly by the end of the year as customers are eager to buy before Tet.
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After rushing to buy a car before Tet and getting the preferential registration fee, many comments said that the car market will become quiet again, because there have not been any factors to “stimulate” the market.
Firms are waiting for another policy change to impact the market strongly.
By Nguyen Ha/ Kieu Oanh
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