Increasing registration fee of pickup trucks: Share information to hold customers

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All pickup models in Vietnam market are imported from ASEAN with 0% import tax. Photo Nguyen Ha

Not surprising

In fact, the increase of the registration fee for pickup trucks has been grasped by consumers and businesses with the expected increase by the Ministry of Finance.

Therefore, on February 28, 2019, when the Government officially announced Decree No. 20/2019/CP-ND, amending a number of articles of Decree No. 140/2016/ND-CP on registration fees, the increase of registration fees for pickup trucks was not a surprise, despite its impact on the market.

When visiting some agents selling pickup trucks in Hanoi, we found that the number of customers asking for information and registering to buy this model had increased after the announcement of Decree No. 20.

A Ford dealer in Long Bien (Hanoi) said: 2 days after the decree was announced, they had signed 7 contracts for selling Ford Ranger cars, an increase from 2-3 cars sold per week compared to the previous time last year.

At a Ford dealership in Ngo Thi Nham Street (Hanoi), the number of customers asking about Ford Rangers had increased. However, according to a salesman there, from August 2018, when the Ranger model met the import conditions, customers wanting this model took advantage of buying before New Year’s Eve. In fact, the information on the increase of registration fee is widely available, it is only the specific implementation time that customers have to consider before purchasing.

On the business side, talking to reporters from the Customs News, a Ford Vietnam representative said: The roadmap to change the registration fee for pickup trucks was not unexpected and had already been calculated. Due to balancing customer demand, the amount of imported vehicles is sufficient because businesses do not import for a large stock reserve.

A representative of a Toyota dealer also said that because customer demand could not be determined when the fee increased, so the amount of imported cars was moderate because all businesses waited until the Decree took effect and for the resulting customers’ orders.

"All pick-up trucks are imported 100% according to customers’ orders, so the quantity must be balanced, if not, car dealers would suffer big losses. We received information on raising tax fees from 2017 - 2018, and when the Ministry of Finance officially submitted Draft Decree No. 20, car dealers knew how to increase the registration fee and take an initiative in their business plans,” said a dealer in Gia Lam street.

A Mitsubishi Vietnam representative, whose 201 Triton model pickup has just been launched into the market, confidently said, "The company already had business plans for the new Triton model before the increase, so basically there was not much disturbance.”

Currently, information of registration fee increase is discussed quite actively on social networking sites with the concern that cars will increase in price and dealers will hoard goods, creating virtual “hot demand” for a few days before the Decree takes effect. But this worry is not expected to happen.

The adjustment of registration fee with pickup trucks is expected to have a big impact on the market.

How to increase, why increase?

According to the Government’s Decree No. 20/2019, pickup trucks will have to pay the first registration fee equal to 60% of the initial fee of cars with less than 9 seats. The Decree takes effect from April 10, 2019.

Thus, with a registration fee of 10% for cars with less than 9 seats for the whole country, the registration fee for pickup trucks is 6% instead of 2%. For Hanoi alone, registration fees for passenger cars under 9 seats are 12%, pickup trucks will be 7.2%.

With this adjustment, all pickup trucks on the market have different rates. For example, if 6% is applied to the current best-selling Ford Ranger model, which is the Ranger XLS 2.2L, customers will have to pay 37.8 million (up 25 million compared to the previous registration fee of 2%). For Hanoi customers (a 7.2% payment), the manual version of the Ranger XLS 2.2L will cost more than 32 million VND, the automatic version will be priced at more than 33 million VND compared to the previous fee.

With Ford's Ford Raptor, if the registration fee of 6% is 72 million VND, at7.2% it is 86 million VND/ car. Compared to the previous fee, the new fee caused Raptor to be added from 48 million VND (nationwide) and 62 million VND (in Hanoi).

With the 3.2L version of Mazda’s BT-50 that is currently priced at 830 million VND, the old registration fee is about 16.6 million VND, but when applying the new fee, it will increase to about 59.76 million VND in Hanoi, and 49.8 million VND nationwide.

Brands of pickups such as Mitsubishi's Triton; Mazda BT50; Toyota and Colorado's Hilux, are all priced at 25 - 50 million VND per car.

According to the Ministry of Finance, these types of pickup vehicles participate in traffic complying to the same road sign systems as for cars. Meanwhile, the first registration fee for cars is between 10-15%, and pickup trucks are only applied at 2%.

The Ministry of Industry and Trade also said that the special consumption tax policy, import tax and registration fee for pickup trucks did not ensure fairness with cars with the same cylinder or seating capacity. Therefore, the Ministry of Industry and Trade has proposed a solution to report to the Prime Minister to assign the Ministry of Finance to study to increase registration fees for pickup trucks.

The Ministry of Industry and Trade also said that the special consumption tax policy, import tax and registration fee for pickup trucks did not ensure fairness with cars with the same cylinder or seating capacity. Therefore, the Ministry of Industry and Trade has proposed a solution to report to the Prime Minister to assign the Ministry of Finance to study to increase registration fees for pickup trucks.

After adjusting the registration fee, to maintain growth, firms need to calculate and share with customers

Informing customers

So far, most of the car companies that have products in the semi-segment have not made any marketing moves before the information of the increase in registration fee. However, now in February and March, many automakers have been launching attractive promotional packages.

For example, Mitsubishi Vietnam is maintaining promotions for new customers to buy Triton in February and March 2019, with the sale price including the rear topper lid (worth 20-30 million VND) and reversing camera (worth 2.5 million VND). Also from the second half of last February, Nissan Vietnam launched a promotion package for customers to buy Navara VL and EL, including accessories and support for registration fee (13.3 - 16.3 million VND), or for customers who do not want accessories, selling price will reduce by another 15 million VND. Also in February, Mazda BT-50 launched a discount program of up to 40 million VND or will add respective accessories.

With the increase of registration fees, dealers expect companies will continue to maintain promotions to hold onto customers, and if not, an agent will calculate and consider having their own merchandizing program...

Market analysis shows that if firms don't have promotions for customers, consumers will have many other options. Because of VAMA's report, sales of pickup trucks in 2018 were low due to the choice of big city consumers who no longer liked big, bulky models. Moreover, the models are getting more expensive, with prices ranging from 600 to 900 million VND, for those who are able to choose between a sedan, SUV or multi-purpose urban models.

So in order to compete, in addition to maintaining promotions, what companies need to consider is reducing the price of cars. Pickup trucks are now imported from ASEAN countries. In 2018, when the import tax on cars in the region dropped to 0%, the pickup models did not show a reducted price as expected.

Except for the model with the lowest sales volume in the segment, the Isuzu D-Max, which was reduced by 20 million VND, other pickup trucks all increased or kept the same price (when the import tax had not been reduced). Toyota Hilux with new 2.8 litre engine increased by 22 million VND (695-878 million), Ford Ranger Wildtrak with a new 10-speed gearbox remains at the highest price of 918 million VND, Mazda BT-50 with the slightly upgraded price of 655-829 million VND, and Mitsubishi Triton with a price increase of 28 million...

So this is the time for firms to consider reducing car prices.

With convenient advantages when combining both street and freight use, features and equipment are increasingly being updated to be the same as passenger cars, so it is believed that pickup models continue to attract a large number of customers. Predicting an increase in registration fee only causes a stir in the market and will maintain the pace of sales.