Auto market cools

Auto market cools

A car showroom in Ho Chi Minh City Car dealers had great expectations for this year but sales have been slowed by economic conditions.

Higher auto import taxes combined with sky-high lending interest rates have bitten the auto business this year, leaving dealers with packed showrooms but few customers. The tax on imported new cars was increased twice in April, from 60 percent to 70 percent and then to 83 percent. Concerns about further increases in imported duties saw domestic car traders rush to import autos, pushing the volume of imported vehicles up to 42,000 units in the first six months of the year, 50 percent more than the imports for all of 2007. But banks’ tighter credit policies meant car dealerships have not been achieving the sales they were expecting. The government planned to raise registration fees to up to 15 percent this year from 5 percent now and is also mulling further increases in import taxes to help reduce the ever-worsening congestion on the nation’s roads. The Vietnamese government needs to discourage automobile imports to help bring its alarming trade deficit under control. The trade deficit is estimated to increase to US$15.01 billion in the first seven months of this year. Lending rates are now as high as 21 percent per year after the central bank this year raised the benchmark rate, which guides deposit and lending rates, to try toslow inflation. The benchmark rate was lifted by 2 percentage points to 14 percent per year in June. Sales of four- to seven-seat vehicles in Ho Chi Minh City have recently slowed. Domestic traders revealed some of their counterparts in Hanoi were also struggling to sell 2,000 once popular low-priced cars imported from Korea in March. Many importers blamed the government’s policies for their poor sales. “For some models we have to pay a heavy import tax of 83 percent while carmakers pay a tax of only 40 percent,” one HCMC car importer said. “That deficit helps carmakers earn big profits.” But the latest figures from the Vietnam Automobile Manufacturers’ Association (VAMA) showed sales of its 16 carmakers fell for the first time in the first half of this year. VAMA sold 9,749 cars last month, a decrease of 1,745 units from May. In the minivan category, sales of Toyota’s Innova, its best-seller model, last month fell to 1,415 units while purchase of GM Daewoo’s Chevrolet Captiva last month dropped to 379 units from 592. Other models, such as the Isuzu Highlander and Mitsubishi Grandis, experienced a similar slowdown in sales, with only around 100 units sold. “Accelerating inflation, which caused people to cut their consumption, is one of the main causes of the gloomy market,” said the director of a HCMC car importer, who asked not to be named. Year-to-date inflation is 21.28 percent, according to the country’s General Statistics Office. In July, inflation was 27 percent year-on-year the government said last Thursday. Another cause for slower sales is the banks’ limit on providing loans to buy cars. Lenders such as Sacombank, Techcombank, Asia Commercial Bank and SeaBank, who used to be eager to offer car loans, now only provide loans to clients with whom they have a “good credit relationship.” Reported by Hung Son