The 'chess game' of car prices: Waiting for the checkmate move.

The final "game" in the automotive market: The decisive game for a large reward already laid out on the table in the Vietnamese automotive market...

The Vietnamese automotive market in 2017 is like a final "chess game" between car manufacturers and distributors on one side and consumers on the other. This decisive game, with a large prize already placed on the table, is forcing both sides into difficult positions.

By this point, retail prices for mainstream cars have truly dropped to very low levels, and consumers have been more or less affected by this.

A nail-biting chess match.

2017 was the final period for automakers to prepare for a pivotal phase, before import tariffs on completely built-up (CBU) cars originating from ASEAN countries were reduced to 0%.

Although not all ASEAN-imported vehicles will benefit from this tax rate, and the pricing scenario won't be as simple as 1 + 1 = 2, it at least paints a picture that consumers will certainly have high expectations for. This has put car manufacturers in a somewhat passive position.

Meanwhile, given what appears to be a rosy outlook, consumers can proactively position themselves, willingly waiting for favorable outcomes to meet their shopping needs.

Therefore, when the game officially begins, both sides make slow opening moves.

Right from the start, the most basic offensive tactics employed by car manufacturers involved launching a series of moderate discounts and promotions. This provocative move aimed to get consumers into a responsive position by encouraging them to join the purchasing game.

However, the prospect of a price reduction in 2018 was somewhat overwhelming, at least psychologically. That's why consumers continued to play it safe with cautious moves. Even though car manufacturers intentionally exposed their weaknesses with aggressive price reductions and promotions, consumers didn't immediately become enthusiastic about participating in the market.

As a result, both consumers and automakers are locked in a difficult position. Every move now is hard to make because it's not guaranteed to yield the desired results.

Even now, with just over three months left until the official start of 2018, consumers are still waiting.

After the initial price cuts, car manufacturers continued to launch further discounts and promotions, albeit smaller in scale, but lasting as long as the rainy season. By this point, retail prices for mainstream cars had truly dropped to very low levels, and consumers had been more or less affected by the price reductions.

In August 2017, overall car sales across the market rebounded by 12% compared to the previous month, although still quite low compared to the same period last year. In September, promotional campaigns continued, and car sales can be expected to recover further.

Unpredictable scenario

Having adopted a restrained stance since the beginning of the year, automakers have begun to gain an advantage for their next moves in the game. On the other hand, the cautious defensive approach since the beginning of the year has also started to yield results, with car prices being forced down significantly, especially compared to the period before 2016.

At first glance, the moves of both consumers and automakers have become more open, no longer as defensive and suffocatingly tight as before. However, the scenario of the final game in the 2017 automotive market remains truly difficult to predict, and perhaps the outcome will only be foreseen at the final "checkmate" move.

In reality, the tense game of the automotive chessboard is not orchestrated by consumers or car manufacturers; they are merely "players" forced into the game. The one setting the stage is none other than the ASEAN Trade in Goods Agreement (ATIGA), or in other words, the governments of the Southeast Asian countries.

Perhaps it was the passive mindset at the start of the game that made both players cautious, even though the reward was substantial.

In any case, although not entirely clear, car manufacturers still hold a certain advantage in this game. They have a better understanding of tax policies, the different tax rates for each type of vehicle, and can proactively offer products that they see as more profitable. This means that car manufacturers can calculate their moves further ahead than consumers.

Many automakers have already made the first crucial move: lowering prices and offering massive promotions on cars.

The evidence is that, simultaneously with aggressive price moves, automakers are still preparing countermeasures for the final checkmate and a plan to capitalize on the outcome of the game.

With aggressive price reductions and demand-boosting measures, it's quite clear that car manufacturers are waiting to launch several models imported directly from Thailand and Indonesia into the market as soon as 2018 begins. These models will all benefit from a 0% import tax rate under the ATIGA agreement.

However, it's also worth noting that the number of these models is quite small; even counting them on one's fingers would be excessive.

This suggests that the scenario of a mandatory price reduction in the automotive market from 2018 onwards remains uncertain. Furthermore, it is almost certain that price reductions will cause some disappointment among consumers, especially those who have been and are still willing to ignore rising prices and wait.

Furthermore, along with the desire to own a car, each consumer has their own preferences or needs that suit different types of vehicles. Meanwhile, as mentioned above, the number of car models that benefit from a 0% tax rate is very small because all of those vehicles must meet an important condition: a localization rate of 40% or more.

As the "game" nears its climax, the consumer's advantage seems to diminish. Assuming that, at the end of the game, the 2018 price reduction scenario doesn't unfold as expected—meaning the overall discount rate isn't lower than the current rate—consumers will be the ones to suffer the consequences.

However, another possibility cannot be ruled out: that car manufacturers will be forced to cut back on product lines that do not benefit from the tax in order to increase the number of models imported from ASEAN countries at a 0% tax rate. In that case, suppressing consumer demand could actually yield positive results.

However, until the game is over, the outcome is still just a prediction, and players must wait for the checkmate move that ends the game.

According to Duc Tho/vneconomy