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Without incentives, will car prices increase at the end of the year?

18:08 | 05/12/2020

VCN - The incentive to reduce 50% of the registration fee for domestically produced cars will not be extended to 2021, the incentives, promotions and discounts will end at the end of the year. The car market is expected to be exciting in the occasion before the Tet holiday.

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The Vietnamese auto market has seen a strong recovery, signaling an exciting year-end shopping season.

Reducing registration fee, effective support

The outstanding results of the auto market in recent months are pointed out by the effective support package of the Government, in which the focus is on reducing the registration fee by 50% for domestically produced vehicles.

In the first six months of the year, due to the influence of the Covid-19 pandemic, the total market sales decreased by 31% compared to the same period last year. It is assumed that for the whole year, the automobile production and business results will be very difficult. Auto business “asked the Government for help". At the end of June, Prime Minister Nguyen Xuan Phuc signed Decree 70, stipulating that the registration fee for domestically manufactured and assembled cars will be reduced by 50% in 2020, effective from June 28 to December 31(with under 9 seats, customers in Hanoi only have to pay 6% registration fee, in Ho Chi Minh City it is 5%).

This policy directly supports car buyers, when the actual reduction is very significant (in the small segment, the car price is from VND400 million to VND700 million, customers can save VND20-30 million; in the car segment to have a price of several billion, the preferential amount is also up to several hundred million).

Thereby, the sales volume of manufacturing enterprises increased, helping agents push inventory. To August, the sales decreased because of the same period in the Ngau month, the sales of 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, and much higher than the first six months (31%).

In order to compete with domestically manufactured cars, many imported cars are also subject to a 50% reduction in registration fees by distributors like domestically assembled cars. Even some models such as Honda CR-V, or Volkswagen cars are supported by distributors with 100% of registration fee for car buyers.

This positive effect is most evident in October, with a record 22% growth. Sales of models that have attracted customers such as Toyota Vios, Hyundai Accent, Mitsubishi Xpander or VinFastFadil continued to grow by hundreds of cars compared to the previous month. Most of the car models included in the list of 10 best-selling cars in Vietnam in October achieved sales of more than 1,400.

In particular, Toyota Vios set a record with 3,443 cars – the highest level for a tourist car model since the beginning of 2020 up to now. The Hyundai Accent also reached 2,230 cars, VinFastFadil reached 1,851.

The policy of 50% reduction in registration fees for domestically produced car models has had a strong impact on the Vietnamese auto market.

Sales volume of three months does not offset the whole year

Although there are signs of recovery with brilliant results in October, the auto market has not been able to offset the decline since the beginning of the year.

Accumulatedin the first 10 months of 2020, total sales of VAMA members decreased by 18% over the same period last year. In which, sales of locally assembled vehicles decreased by 12% and imported cars decreased 26% compared to the same period last year.

According to experts’calculations, even if the November and December results are very good, it will be difficult for 2020 to reach the consumption level of nearly 400,000 cars as in 2019. The total sales in the past 10 months only reached 2,409 vehicles. On average, each new VAMA member consumes more than 21,000 vehicles per month, while the average of the previous year was over 33,000 vehicles/month.

Not to mention the source of cars (including production and import), it is difficult to quickly increase to meet demand.

Instead of being indifferentlike in the first months of the year, at the end of the year, customers will rush to buy cars to enjoy incentives and promotions.

Updated data from customs statistics showed that in October the country imported 13,653 vehicles (with turnover reaching $283 million), of which 10,379 cars were imported from 9 seats or less (valued at US$191 million). By the end of October, the volume of imported complete cars of all kinds reached 80,110, down 33.8% over the same period last year, of which, 9-seater cars or less totaled 59,699 cars, down 34.2 %.

The market also shows that some models are not enough to supply according to customer needs.

For example, in a month, Toyota Vietnam received 4,000 orders for Vios (exceeding the company's target), but dealers only delivered 3,443 units (about 86%). Like the Mercedes GLC, the luxury locally assembled car is also out of stock. Some customers are impatient for the delivery of the car and expect to receive the car before December 30, while many customers have accepted a different version or color.

Estimates from manufacturers show that the volume of assembled vehicles has increased by 15% of sales and that businesses are increasing production to meet orders to customers before the end of 2020. But cars are a particular item that is difficult to speed up production in a short time, not to mention the supply of components and accessories can’t increase immediately.

Car price increases

Commodity prices depend on supply and demand, so the demand for car shopping in the last month of the year is increasing, while demand is limited, so dealers consider cutting incentives, bringing prices back to the listing level, even forcing customers to buy more accessories if they want to receive the car early.

According to a survey from the market, there are some models that have risen again.

Information that the Ministry of Finance reported to the Government with the opinion that it is proposed not to extend the preferential period of 50% reduction of the registration fee for domestically produced cars (until January 1, 2021) will have a strong impact on the auto market.

If this proposal is approved by the Government, customers who buy a car have less than two months to enjoy this offer. The situation of customers rushing to buy cars in time to register before 2021 to enjoy incentives is expected to occur.

This fact shows that the auto market in the last month of the year will be very exciting, leading to the situation of queues to buy cars, prices of cars increase, customers have to accept to pay more money or buy accessories.

By Nguyen Ha/Quynhlan