Vietnamese customers limit buying large luxury cars after July 1

The new excise tax rate pushes car prices so high that luxury car companies lose a significant number of customers in July.

After July 1, when the new special consumption tax rate took effect, many car manufacturers began to adjust their selling prices in Vietnam. Small cars under 1.5 liters decreased in price, but the decrease was not deep, not really affecting consumer decisions. On the contrary, in the luxury car segment, which is mainly equipped with large engines, the price increased significantly, possibly up to several billion VND per car. This change caused the segment's sales to decline.

According to data from the Vietnam Automobile Manufacturers Association (VAMA), the industry's total sales in July reached 28,004 vehicles, up 15% compared to June and up 38% compared to the same period in 2015, of which 20,726 were domestically assembled vehicles (up 15% compared to the previous month) and 7,728 were imported vehicles (up 14% compared to the previous month).

Lexus NX200t.

The effects of taxes have a clear impact on Vietnamese people's car purchasing decisions. While in the popular segment, the top 10 best-selling cars all saw sales increase compared to the previous month, the opposite is true for luxury cars.

Lexus, a Japanese luxury car brand with strong brand power in Vietnam, recorded a sharp decline in sales. In July, only 24 Lexus cars were delivered to customers, while in June, sales reached 242 cars. That means July sales were only 10% of June.

Meanwhile, its German rival Mercedes also saw a decrease in sales, but not significantly. Sales of the company with the three-pointed star logo in July were 489 cars, down slightly from 502 cars in June. Some other luxury car companies did not announce sales but also noted that they were affected by the market.

Lexus currently sells 7 car lines in Vietnam: ES, GS, LS, NX, RX, GX and LX with 9 versions. Of which, 6 versions have increased in price, only three models ES250, NX200t and RX200t have kept the same price because they are equipped with 2-liter engines without tax increase. The remaining versions have increased by at least 480 million and at most 2.3 billion.

Mr. Hai Khang, a luxury car import dealer, said that Lexus's 90% drop in sales compared to last month was due to many reasons, of which price changes were a major factor.

For example, the LX570, which was priced at 5.7 billion before July, has increased to 8 billion since July. "Even the richest people will hesitate with an increase of 2.3 billion," Mr. Khang analyzed. With the new price, customers will hesitate and switch to other options, maybe a car from another brand or a smaller car from the same brand.

This person added that besides the direct cause of customers switching to other cars because of the large price increase, there are many other causes that lie in the way the market operates. Before July 1, knowing that car prices would increase sharply, many customers tended to order tax-exempt cars several months in advance.

Mercedes GLC.

Because of this mentality, many showrooms outside even import cars from the manufacturer and then hoard them, or sell them immediately to customers with the advantage of not having to wait like the manufacturer, the price increases less to benefit from the difference. Finally, customers who are still hesitant and not ready to buy a car will wait and wait until the market stabilizes.

Mercedes only saw a slight decrease because the company has an extensive product portfolio, many domestically assembled cars and 2-liter engines have not increased in price. Besides, Mercedes's most expensive models, Maybach and AMG, are only for certain customers, not the company's best-selling cars.

GLC is a model that contributes a lot to maintaining high sales for the company. At this stage, customers buying GLC have to wait up to 6 months. The price from July 1st only increased by 20-120 million compared to before depending on the version, so it does not affect the customer's purchasing decision much.

August enters the slow shopping season as it does every year because it coincides with the 7th lunar month, a month when Vietnamese people abstain from shopping. The market may suffer from low sales like in July. Some low-end car manufacturers have reduced prices to stimulate demand, but the luxury car market has not changed much.

According to VNE