Gloomy auto market awaits stimulus

Ms. Phuong Thao, a saleswoman at a car dealership in Yen Nghia, Ha Dong (Hanoi), said that sales have dropped sharply these days due to weak purchasing power. This is in stark contrast to a year ago. Around May and June 2022, the last two months of the 50% reduction in registration tax for domestically produced and assembled cars, Ms. Thao had to continuously work overtime to complete procedures for customers, and sales skyrocketed.

Car companies are continuously launching big discounts and promotions to stimulate consumer demand. (Photo: Viet Linh)

The automobile market is witnessing a difficult period, with sales plummeting. Most car manufacturers have adopted a common policy of supporting registration fees for buyers at a rate of at least 50%. Some large car manufacturers even have additional promotional policies to attract customers. However, the business situation of enterprises has not improved.

In fact, the latest report from the Vietnam Automobile Manufacturers Association (VAMA) continues to show that the total automobile market sales in April decreased by 30% compared to the same period in 2022. Of which, sales of domestically assembled vehicles reached 13,325 vehicles, down 18% compared to the previous month and sales of completely imported vehicles were 9,084 vehicles, down 34% compared to the previous month. A stimulus policy from the State is urgently needed to support domestic production.

"Gloomy" business quarter of a series of car dealers

A series of first quarter financial reports recently released by many auto distribution companies also clearly show the declining business situation of the entire industry. Savico - a major distributor of many car brands such as Toyota, Ford, Honda, Hyundai, Mitsubishi, Suzuki and Volvo recorded a gloomy business quarter.

Specifically, in the first 3 months of the year, Vietnam's largest auto distribution company had a profit after tax of VND14.7 billion, down nearly 85% compared to the same period in 2022 and down more than 11 times compared to the previous quarter. Notably, the amount of inventory exceeded VND2,000 billion.

According to the explanation of the company's management board, in the first 3 months of the year, the supply of car manufacturers was abundant but purchasing power was slow due to the general impact of the decline in the whole market, causing a sharp increase in inventory value. On the other hand, increased operating costs and high interest expenses caused Savico's profit target to drop sharply.

In the first quarter, many auto distribution businesses recorded a decline in business performance across the entire industry. (Photo: BH)

Similarly, Mercedes-Benz distributor Haxaco has also just recorded a decline in business results in terms of profit due to the impact of the auto market due to high interest rates and decreased demand.

Specifically, in the first quarter, Haxaco's net revenue only reached nearly VND993 billion, down more than 40% compared to the same period. The company holding the largest market share in distributing Mercedes-Benz in Vietnam also only recorded a pre-tax profit of VND5.6 billion in the first quarter, down about 92% compared to the same period, and a net profit of only VND3.5 billion.

Not only that, City Auto Joint Stock Company - the official authorized unit of Ford Vietnam also recorded a slight decrease in profit of 21% to more than 11 billion VND due to the amount of debt accounting for 80% of the company's capital.

For Hyundai, total sales in April reached 4,592 units, while in March 2023, 5,773 units were sold. If counting the entire chain from November 2022 to now, Hyundai's car sales have dropped sharply.

Previously in February, Hyundai sold a total of 5,467 vehicles, including 4,753 passenger cars. Thus, car sales were almost flat and decreased.

Reduce taxes and fees to "save" the domestic auto market

In the context of a sharp decline in car sales and many market difficulties, many businesses, associations, experts and ministries and sectors believe that a 50% reduction in registration fees for domestically produced cars until the end of the year is necessary.

“Continuing to apply the policy of supporting the reduction of registration fees for domestically produced and assembled cars for an appropriate period of time is necessary and consistent with the general spirit, contributing to stimulating consumer demand, supporting car manufacturing and assembly enterprises and distributors to sell their inventory of cars,” the Ministry of Industry and Trade stated.

Car sales in the first quarter were gloomy. (Photo: Viet Linh)

Recently, at a working session with the delegation of the Ministry of Industry and Trade, a representative of the Vinh Phuc Provincial People's Committee also requested the Ministry to recommend the Government to continue issuing policies to develop the automobile and motorbike industry, in which in the immediate future, consider continuing to reduce registration fees for domestically produced and assembled cars to stimulate domestic consumption and production of cars...

At the recent regular Government meeting in April, the Prime Minister requested to focus on removing difficulties for production and business, providing timely and effective support for people and businesses; and promoting both demand and supply.

In particular, the head of the Government requested the Ministry of Finance to continue preparing additional support plans for tax, fee and charge exemptions; research and calculate plans to reduce registration tax on cars; propose solutions to handle shortcomings, develop the corporate bond market and the stock market...

(Source: Zing News)

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