The auto market and the price reduction race

Many European and American car lines have not been able to stay out of the price reduction race to stimulate consumer demand in Vietnam. However, the opportunity to buy truly cheap cars for Vietnamese people is still not available because of the high taxes and fees.

Illustration photo. Source: Tuan Nguyen

Japanese and German cars both reduced by hundreds of millions of dong

For 8 consecutive months (from November 2016 to now), the race to reduce car prices in the Vietnamese market has shown no signs of "cooling down". The pioneer and the one who has maintained the reduction in car prices is Truong Hai Auto Corporation (Thaco) with 3 brands Mazda, Kia and Peugeot from several tens of millions of VND to nearly 200 million VND.

In mid-May 2017, Thaco representative announced that the price of domestically assembled Mazda cars had hit rock bottom and could not be reduced any further, and if there was any reduction, it would only be done by the dealers themselves. However, in early June, Thaco announced a reduction of 30-40 million VND for the Mazda CX5 model.

Hyundai Thanh Cong (HTC) also offers incentives for two best-selling models, SantaFe (50-70 million VND discount) and Elantra (40-50 million VND discount) this June. From June 15, HTC also reduces the price of the Tucson by 20 million VND along with an accessory set worth 30 million VND. If you do not receive the accessories, the total incentive is up to 40 million VND.

Among Japanese car manufacturers, Mitsubishi Vietnam also reduced prices by 50 - 106 million VND for the two Pajero Sport models, 90 million VND for the Outlander model; 60 million VND for the Triton and 50 million VND for the Mirage model.

Honda Vietnam offers discounts of up to VND150 million for the basic CR-V 2.4AT version and VND100 million for the CR-V 2.4 AT-TG. The Civic Turbo model is also discounted by VND50 million for customers who purchase the car from June 5.

Also in June, Nissan Vietnam offers a discount of 10-20 million VND and a gift of an AVN navigation system and floor mats for customers buying an X-Trail; a discount of 5-30 million VND or a gift of a trunk lid worth 30 million VND for customers buying the Navara model; 5 million VND or accessories for the Sunny XV (automatic version - AT); 10-20 million VND for the Teana model.

Another company, GM Vietnam, also offers a discount of up to 70 million VND for customers who buy the Cruze LTZ and Colorado 2.8L 4x4 AT LTZ models; 50 million VND for the Cruze LT model; 30 million VND for the Colorado 4x4 MT LTZ version; and a discount of 20 million VND for the Colorado 2.5L 4x4 and 4x2 MT versions.

Although Toyota Vietnam rarely offers promotions or discounts, in the current context, the company cannot stay out of the game. In June, the company launched a "huge promotion" program, offering a 3-year or 60,000 km periodic maintenance package to customers who buy a car. In the market, the prices of all car models distributed by Toyota Vietnam have dropped sharply. Camry has dropped from 95-120 million VND, Altis has dropped from 55-70 million VND, Innova has dropped from 65-70 million VND, depending on the version.

In the price reduction race, to compete with imported cars from ASEAN and cars assembled in Vietnam, European car manufacturers such as Touareg, Polo, Peugeot and Volvo... cannot stay out of the race. The most surprising thing is that Volkswagen Vietnam has a huge discount of up to 260 million VND for the Touareg SUV model. This is a luxury car, 3.6L engine, 8-speed transmission, equipped with many modern technologies.

Volkswagen Vietnam also reduced prices by 50-80 million VND for Polo sedans and Polo hatchbacks to compete with Japanese models that are selling well in the B-class Sedan segment such as Toyota Vios and Honda City. Immediately, in mid-June, Toyota launched the new Vios TRD 2017 with a selling price of 664 million VND, Honda launched the City 2017 with a selling price of 568-604 million VND depending on the version to give customers more choices.

Luxury car manufacturer Volvo also offers a program to give 12% of the registration fee to customers who buy the XC 60 model, equivalent to 228 million VND. In addition, customers who buy two other models of the company, the XC90 and S90, will receive body insurance, interior wood panels and cash of about 30-50 million VND.

Can consumers buy cheap cars?

In fact, the fact that businesses launched price reductions and promotions to stimulate demand has partly helped the sales of the entire Vietnamese automobile market in May 2017 increase by 6% compared to April, and by 11% compared to the same period in 2016. According to data from the Vietnam Automobile Manufacturers Association (VAMA), sales in May 2017 reached 23,232 vehicles. However, in the first 5 months of the year, the total sales of the entire Vietnamese automobile market only reached 109,903 vehicles, down 1% compared to the same period last year.

Economist Ngo Tri Long said that businesses are reducing car prices to compete with imported cars from ASEAN that receive tax incentives, especially as 2018 approaches. Car prices will continue to decrease, but consumers still cannot buy cars at a cheaper price than those in other countries in the region.

The reason, according to Mr. Long, is that the traffic infrastructure in Vietnam is underdeveloped, so the government still offers many solutions to increase registration fees, import taxes, and special consumption taxes to reduce traffic congestion, especially in the two big cities of Hanoi and Ho Chi Minh City...

Second, people's income is not high, so the wait-and-see mentality continues, especially when there are only 6 months left until 2018. In addition, the cost of purchasing components for domestic production and assembly is still high. Therefore, according to Mr. Long, consumers still cannot buy truly cheap cars, which is already difficult in regional countries.

From the above reasons, expert Ngo Tri Long believes that the Vietnamese automobile market will hardly have good growth in the coming time.

According to TPO