Fluctuations in Vietnam's automobile market in 2017

The car price reduction war, the rise of Truong Hai (THACO) and the impact of new policies... have outlined a turbulent 2017 for the Vietnamese car market.

1. "Chorus" of car price reductions

The refrain of “car price reduction” was played by automobile businesses into a vibrant melody in the Vietnamese automobile market in 2017.

According to the ASEAN Trade in Goods Agreement (ATIGA), the import tax rate for completely built-up cars from ASEAN countries to Vietnam decreased from 40% in 2016 to 30% in 2017 and to 0% from 2018. This has created large fluctuations in car prices on the market.

Car prices continue to fall sharply, causing confusion among consumers

Since the beginning of 2017, many car companies have launched discount programs, while consumers' psychology of waiting for tax reduction and car prices to continue to decrease has created a gloomy atmosphere covering the Vietnamese car market in 2017.

With reduced purchasing power, car dealers continue to reduce car prices. At its peak in June and September 2017, the prices of some car models dropped by hundreds of millions of dong, creating “shocks” for car buyers.

From domestic auto assembly companies such as Truong Hai (THACO), Hyundai Thanh Cong, Nissan, Honda and even the "big guy" Toyota to imported auto brands... have created the biggest price reduction race in the history of the Vietnamese auto industry.

“As a large automobile enterprise in Vietnam, THACO takes responsibility for stabilizing the market and bringing practical values ​​to consumers. In recent times, THACO has also pioneered price reductions according to the integration roadmap when the import tax on components is reduced to 0% in 2018,” said Mr. Tran Ba ​​Duong - Chairman of THACO.

2. VinFast revives the Vietnamese car dream

In early September 2017, the dream of Vietnamese-branded cars faced a chance to revive when Vingroup Corporation unexpectedly started the VinFast Automobile Manufacturing Complex project in Dinh Vu Economic Zone, Cat Hai, Hai Phong City. Speaking at the groundbreaking ceremony of the VinFast project, Prime Minister Nguyen Xuan Phuc emphasized: “Vingroup’s automobile production is a feat, a patriotic act. Automobiles are not just automobiles, but also a national brand; a country with more than 50 million people must have an automobile industry.”

Vingroup Corporation started construction of VinFast Automobile Manufacturing Complex project in Hai Phong

With a total investment of up to 3.5 billion USD, VinFast plans to produce internal combustion engine cars, electric cars and electric motorbikes. After 24 months, VinFast will launch the first two car models with the Vietnamese brand. VinFast's goal is to become the leading car manufacturer in Southeast Asia, with a capacity of 500,000 cars/year by 2025. The cars meet Euro 5 and Euro 6 emission standards, with a localization rate of about 60%.

A month after the groundbreaking, VinFast announced 20 designs for sedans and SUVs and solicited consumer opinions. The birth of VinFast brings much hope for a Vietnamese car brand in the near future.

3. Hyundai Thanh Cong and Truong Hai promote automobile assembly

Along with the birth of VinFast, in 2017 Hyundai Thanh Cong and Truong Hai (THACO) also increased investment in automobile assembly lines in Vietnam, meeting domestic demand as well as aiming to export cars abroad when import tax is 0% from 2018.

Hyundai Thanh Cong invests in expanding automobile assembly line in Vietnam

From import, key models such as Hyundai Grand i10, Tucson... were successively transferred by Hyundai Thanh Cong to be assembled at the factory in Ninh Binh. This unit also won the right to manufacture and distribute commercial vehicles under the Hyundai brand in Vietnam.

“We are all Vietnamese enterprises, with self-respect, desire and desire to maintain the automobile industry, although it is not easy at all. In particular, if we do not try to increase domestic localization, it will be very difficult to have the opportunity to reduce product prices,” said Mr. Le Ngoc Duc - General Director of Hyundai Thanh Cong.

Meanwhile, Truong Hai's ambition to become the leading automobile assembler and manufacturer in Vietnam and Southeast Asia was realized when it started construction of the Mazda car assembly plant in Chu Lai Economic Zone, Quang Nam.

In December 2017, Truong Hai continued to inaugurate a bus manufacturing plant with a capacity of 20,000 vehicles/year. Currently, Hyundai Thanh Cong and Truong Hai are considered the leading flags in the development of the Vietnamese automobile industry.

4. Truong Hai wins the right to distribute BMW and Fuso

In mid-September 2017, BMW Asia, through Truong Hai, issued a statement on the cooperation between the two companies, expressing its intention to choose Truong Hai to become the importer and distributor of BMW and MINI cars in the Vietnamese market from January 1, 2018, replacing Euro Auto, which was prosecuted by authorities for smuggling.

Fuso commercial vehicle brand in Vietnam belongs to Truong Hai

In early December 2017, Truong Hai continued to surprise many people when it officially took over the entire production and business of Fuso trucks and buses from Mercedes-Benz Vietnam (MBV).

“If we do well and succeed with Fuso, THACO will have the opportunity to continue manufacturing and distributing other commercial vehicle brands of Daimler Group in Vietnam. In the immediate future, THACO aims to increase the localization rate to over 40% towards exporting Fuso to countries in the ASEAN region with great advantages from 0% tax incentives,” said Mr. Tran Ba ​​Duong - Chairman of THACO.

5. Decree 116/2017/ND-CP, tightening automobile imports

In mid-October 2017, Decree 116/2017/ND-CP regulating the conditions for production, assembly, import and business of automobile warranty and maintenance services issued by the Government has impacted the Vietnamese automobile market.

New regulations in Decree 116 cause difficulties and obstacles for car importing enterprises

Completely imported cars from ASEAN seemed to have a wide opening to Vietnam when the import tax rate was reduced to 0% from 2018, however, automobile businesses are facing new barriers from Decree 116.

Accordingly, Decree 116 stipulates that automobile importing enterprises must provide a copy of the quality certificate of imported automobile types issued by competent foreign agencies and organizations. In addition, each batch of imported automobiles to Vietnam must bring one vehicle of each type to be tested for emissions and technical safety quality.

In addition, Decree 116 with regulations on car warranty and maintenance facilities as well as documents on recall commitments when cars are defective... has closed the import door to small-scale car businesses.

Decree 116 has created mixed opinions after its promulgation. Many members of the Vietnam Automobile Manufacturers Association (VAMA) believe that Decree 116 is causing difficulties for automobile import activities.

Meanwhile, domestic automobile assembly enterprises such as Truong Hai and Hyundai Thanh Cong believe that the regulations in Decree 116 are appropriate, contribute to protecting consumer rights and can be implemented.

6. Decree 125/2017/ND-CP, opportunities for assembled cars

In mid-November 2017, the Government issued Decree 125/2017/ND-CP supplementing a number of articles of Decree 122/2016/ND-CP regulating export tax schedules, preferential import tax schedules, list of goods and absolute tax rates, mixed tax, and import tax outside tariff quotas.

Decree 125 with new regulations on reducing import tax on components opens up opportunities for domestic automobile production

Accordingly, domestic automobile assembly enterprises will enjoy a 0% import tax rate on components if they meet the prescribed conditions in each period from 2018 to 2022. Immediately after Decree 125 was issued, many automobile manufacturers in Vietnam calculated the car price reduction for the end of 2017 as well as announced the 2018 car prices.

Regarding this Decree, Mr. Tran Ba ​​Duong - Chairman of THACO said: "The import tax rate for completely built-up vehicles will be reduced to 0% in 2018, along with the adjustment of the import tax rate for components to 0%, which will encourage and maintain domestic automobile assembly production", said Mr. Tran Ba ​​Duong - Chairman of THACO.

However, Decree 125 also creates a major barrier for imported used cars when applying absolute tax rates and mixed tax rates for each car model. With Decree 125 and Decree 116 taking effect from 2018, the door for used cars to enter Vietnam is gradually closing. This caused many small and medium-sized car businesses to close in 2017.

According to thanhnien.vn