Vietnam's auto market is at its most exciting stage.

Car prices decrease month after month, the auto market welcomes new policies near the end of the year shopping season, making the auto market unpredictable for both buyers and sellers.

About 2 months before the end of 2017, the government issued Decree 116/2017 with regulations on automobile assembly and import. This has more or less created turmoil in the market, especially in the imported car segment.

Meanwhile, car manufacturers are still applying discount and incentive programs to boost sales, clear inventory to welcome the new year, and adopt new policies. Is buying a car now the most optimal price? This is a difficult question to answer at this time.

Decree 116/2017 tightens imported vehicles

Only businesses with a certificate of authorization for product recall, commitment to technical support, and supply of components from foreign manufacturers are allowed to import vehicles to Vietnam. This provision can be considered a permanent cessation of import for medium-sized businesses that import unofficially.

Because foreign manufacturers only issue this certificate to businesses that have the capacity and potential to import genuine cars. Therefore, it is difficult for cars to be imported en masse, while used cars seem to have no chance at all.

Non-genuine imported cars have almost stopped entering Vietnam since 2018.

This means that consumers can only buy imported cars from authorized importers, with warranty, maintenance, and recall services that meet the manufacturer's standards. Of course, the variety of car models and prices compared to the previous market may not be as good. Side roads such as importing as gifts are rare doors, but each business/individual can only receive 1 car/year.

“This decree will create a healthier business environment for imported cars,” said Audi importer director Laurent Genet.

However, large auto joint ventures that import cars will also face difficulties in planning in the near future. The change in car import regulations in the policy will make it take companies a little more time to get all the necessary documents from the manufacturer. Toyota Vietnam previously accepted orders for the small, low-cost Wigo car, but now the dealer has had to stop taking orders because it cannot deliver cars to customers in time.

The imported car playground will be for genuine import businesses.

Therefore, even though ASEAN import tax is 0% in 2018, the impact on the Vietnamese market may not be too great. Assemblers can still sell cars and wait for the next developments. Of course, consumers do not have many more choices from imported cars.

Mr. Laurent Genet also shared that in 11 years of working in Vietnam, experience shows that the Vietnamese government always has a way to balance revenue for the budget. “Traffic density in Vietnam is increasing, due to improved living standards, many people switch from using motorbikes to cars. The consequence is that infrastructure such as parking lots, roads, bridges, tunnels... must also be increased. Investment sources for these items mainly come from the state budget, so to compensate for the deficit due to ASEAN import tax of 0%, the government will have a way to compensate for this amount.”

Decree 116 will contribute to promoting the business of domestic assembly units by partially restricting imports, thereby increasing the contribution of these enterprises to the budget and helping to offset the deficit.

Car prices drop amid customer anticipation

For many months now, domestic car manufacturers have maintained incentive programs with gifts and cash for customers buying cars. This move aims to stimulate shopping to meet sales expectations set at the beginning of the year.

The information that import tax within ASEAN will be 0% from 2018 has made customers wait, hoping that car prices will be better than now. Therefore, sales in the first 9 months of this year compared to the same period last year of the whole market have decreased, not as expected by VAMA at the end of 2016 with a growth rate of 10%.

The 2017 market did not grow as expected by the Vietnam Automobile Manufacturers Association.

A typical example of the Vietnamese mentality of waiting for cheap car prices can be seen in the Honda CR-V phenomenon in September. The unprecedentedly deep discount in the history of this car line caused customers to rush to buy, to the point that dealers had no more cars to sell.

In just a few days of implementing this policy, CR-V sales ranked second in the market for the first time with more than 1,300 cars, a growth of nearly 500% compared to the previous month. It can be seen that the real demand for car purchases of Vietnamese people still has potential, the market is slowing down at this time only due to the waiting mentality.

ASEAN import tax, along with the calculation of special consumption tax on vehicles with cylinder capacity of 2.0L or less, contribute to the price adjustment of car manufacturers. Recently, Toyota has adjusted down for domestically assembled cars with the announcement that the selling price for 2018, the highest reduction is nearly 60 million (about 10%) compared to the present.

The strong increase in purchasing power of Honda CR-V in September after a sharp price reduction is proof of the waiting mentality of users.

According to Mr. Laurent Genet, this is a very interesting period in the market, for both buyers and sellers. Buyers are waiting for further price reductions, while companies are persistently maintaining the reduction for many consecutive months.

The director of the Audi importer also added that among ASEAN countries, Vietnam uses left-hand drive cars, while most other countries use right-hand drive cars. Therefore, not many car models from the region can be imported to Vietnam.

Changing the steering wheel position is not cheap and takes time to develop. Therefore, at the beginning of applying ATIGA, only a few car models are suitable such as Toyota Fortuner, Toyota Wigo or Ford Ranger.

The new policy means that some car models cannot be brought to Vietnam as soon as the company planned.

Taxes affect the price of imported cars, but another factor that also affects the price of cars is the exchange rate between Vietnamese Dong and foreign currencies. Cars imported from regions such as Europe and the US do not enjoy a 0% tax policy, but only enjoy a special consumption tax that is reduced according to engine capacity. Therefore, the amount of money saved may have to be compensated for the difference in the exchange rate of the dong. Since the beginning of the year, the dong has shown signs of decreasing in value, while the euro and the USD have tended to increase, Mr. Laurent Genet added.

Currently, manufacturers are competing to apply price incentive programs and this can be considered a good time to choose a car for those who really need it. Because waiting until early 2018, the price will most likely not decrease further but increase if there are new policies. A typical example is the case of Mazda, after many months of price reduction, Thaco has made a move to slightly increase the price of its car models this November.

According to Zing