Paradox of the auto market in early 2018

The high demand for cars before Tet holiday in an area with scarce supply is causing chaos in the auto market.

When price becomes secondary

In the days leading up to Lunar New Year, according to a reporter's survey, the auto market appears to be bustling. But hidden behind that is the frustration not only of consumers but also of suppliers due to the situation of "out of stock".

Many consumers go to the dealership to buy a car and all receive the same answer: No more cars.

It is noteworthy that the shortage of goods occurs not only in imported cars but also in domestically assembled cars.

As for imported cars, contrary to consumers' expectations throughout 2017, the market not only did not welcome a massive influx, but also very little.

Up to now, only a few "lucky" car manufacturers have imported a few batches of cars with very small quantities. For example, Honda imported a batch of 750 CR-Vs or Thaco quickly brought in 358 BMWs and MINIs...

Meanwhile, due to a lack of components, the assembly activities of many domestic manufacturers have also been stalled. Even large car manufacturers such as Hyundai Thanh Cong, Truong Hai (Thaco) or Toyota do not have enough cars to deliver to customers.

According to the survey, the shortage is most serious for car models that are popular with consumers. While the demand for car purchases before Tet increases sharply, car manufacturers are facing a shortage of supply.

A tour of Honda dealerships in Hanoi shows that not only is the imported CR-V in short supply, but the domestically assembled City is also not available for consumers to order. Honda dealership staff said that customers will have to wait until after Tet for the City model and the delivery time is also uncertain because they do not know when the factory will have new cars.

Even half a month ago, Thaco also sent a notice to the dealer system to "thoroughly" stop trading for two best-selling car models, Mazda CX-5 and Kia Cerato.

Faced with a shortage of goods, many customers at car dealerships admitted that having a car to buy is now more important than price.

"I made a mistake by not buying a car last year because I wanted to wait until this year to buy a cheap car. Who would have thought that now I offered to pay more to get the car before Tet but they all shook their heads," said Mr. Nam in Thanh Tri (Hanoi).

A customer from Bac Giang came to Hanoi to buy a fully imported Honda CR-V. After a tour, he looked tired: "The price of this car has increased by hundreds of millions compared to the expected price. However, when I even offered to "bribe" the sales staff, they still shook their heads. They explained that only a few cars were imported so they were all sold out, there are currently no more cars to sell and it is not known when new imported cars will be available."

The situation of consumers "demanding" to pay more to buy a car is no longer rare. The most common is with models imported by manufacturers in small quantities such as Toyota Land Prado, Ford Explorer or even Honda Civic. Even the best-selling pickup truck on the market, Ford Ranger, is in short supply, causing consumers to be eager to pay more to sign a contract.

For many consumers, this may be a surprising situation because just a month ago, in 2017, the mentality of waiting until 2018 to buy cheap cars dominated the entire market. This mentality caused the total purchasing power of cars in the entire market to drop even though the price level of popular cars in 2017 was very low.

In contrast to the indifference to price reductions in 2017 in anticipation of an unclear prospect in 2018, for many consumers, price has now become secondary and the most important thing is whether or not there is a car to buy.

Many consumers cannot buy a car even though they accept paying the extra difference.

"Broken battle" due to scarcity of supply

The adversity of the automobile market these days is considered to originate from policies issued since the end of 2017 and officially effective from January 1, 2018.

Specifically, in October 2017, the Government issued Decree 116 with new regulations related to imported automobiles and Decree 125, which adjusted import tax on automobile components.

First is Decree 116. According to this decree, in addition to the requirements for standard items such as service workshops and testing tracks... that automobile businesses must meet, there are two other regulations that are hindering the "entry" of imported cars: the requirement to have a type quality certificate and the requirement for inspection of each batch of imported cars.

Immediately after Decree 116 was issued, many businesses spoke out about the difficulties, even paradoxes, because countries around the world do not have the type of documents required by Decree 116. However, some other businesses said that the world's automobile corporations can meet the required procedures. The problem is that before there was a specific guiding circular, businesses did not know how to handle it.

Another regulation that is causing difficulties for imported cars is the inspection requirement. Specifically, according to the new regulation, each imported car batch, regardless of quantity and regardless of the same type, same model with the same parameters, must be inspected. Enterprises calculate that if this regulation is implemented, each imported car batch will incur an additional cost equivalent to about 10,000 USD and a waiting time of about 2 months before it can be sold on the market.

The domestic assembled car market is less… tragic. Immediately after the Government issued Decree 125, which applies a preferential import tax rate of 0% for some types of auto parts for 5 years, several car manufacturers immediately reduced retail prices according to the new component tax to stimulate demand.

However, the price reduction that began to take place widely since November 2017 has had almost no significant impact on the market other than communication effects.

The evidence is the current shortage of goods. The reason, admitted by car manufacturers, is that waiting for imported components at a 0% tax rate has slowed down assembly activities. When production and assembly activities stop to wait for components, of course, the number of cars produced will decrease sharply, causing a shortage of supply in the market.

When the import tax on cars from ASEAN countries was reduced to 0%, the market should have had a bustling season. However, two new policies have indirectly caused the market to "collapse" due to the scarcity of supply.