Headwinds for automobile firms

Drowning in Difficulties

According to the Vietnam Automobile Manufacturers Association (VAMA), overall market vehicle sales (containing real retail numbers from VAMA members and entire imported vehicle data from non-member companies) totaled 82,515 units at the end of April 2024, down 11% from 2023. Passenger automobiles fell 14%, commercial vehicles sales 3%, and specialty vehicles by 28% over the previous year.

TC Motor sales data showed that Hyundai automobile sales in the first four months of 2024 were 14,420 units, a considerable decrease from the 19,328 units sold in the same time in 2023. Many vehicle manufactures' sales numbers fell in early 2024. Toyota fell 32%, Hyundai 25%, Kia 22%, Lexus 14%, Mazda 13%, Ford 7%, Peugeot 5%, and Mitsubishi 3%, respectively, compared to the first four months of 2023.

Some major car shops' first-quarter business statistics for 2024 revealed sharp decreases in revenue and profit. For example, Saigon General Service Corporation (Savico), which operates over 50 vehicle dealerships nationally, recorded revenues of 2.060 trillion VND, a more than 15% decrease from the same period previous year. After-tax profit was little over 8.2 billion VND, representing an almost 44% reduction.

City Auto Company, which has more than 20 dealerships around the nation, reported sales of over 1.505 trillion VND in the first quarter of 2024, a 7% reduction from the same time in 2023. After-tax earnings were 6.8 billion VND, down 39%. Faced with challenges, retail auto dealerships have had to expand into selling used vehicles and researching value-added services such as parts sales, insurance, financial services, and vehicle registration in order to stay profitable.

Waiting Mentality

According to companies, more than a year of economic hardship has forced the car market to "retract" for three years in a row, with current levels only equal to those of 2020. The projection of 800,000 automobiles by 2025 is becoming increasingly improbable.

On April 21, 2024, the Prime Minister signed Directive No. 12/CT-TTg outlining important duties and measures to enhance socioeconomic development. The instruction directs the Ministry of Finance to conduct an urgent study and provide a proposal to the government and Prime Minister in May 2024 about extending the tax payment deadline and lowering registration rates for locally made and assembled vehicles.

Domestically made and assembled vehicles are expected to get a 50% decrease in registration fees between the beginning of July and the end of December 2024, according to businesses. However, the news may prompt many potential automobile purchasers to postpone their purchases in May and June 2024. Car demand is likely to be modest during the next two months.

The automobile market remains dismal. Many retail auto dealerships report financial challenges, forcing them to expand into used car sales and rely on value-added services such parts sales, insurance, financial services, and vehicle registration to compensate.

Domestically built car sales fell 17% at the end of April 2024, while imported vehicle sales fell 3% from the same period the previous year. According to a recent study from SSI Securities, the industry would continue to struggle in the first half of 2024 owing to low consumer demand and purchasers waiting for new car models.