Vietnam Autos Report Q2 2008

Vietnam's new vehicle market benefited greatly from lower import tariffs and the country's strong economic growth in 2007, as sales almost doubled to 80,392 units. Despite four cuts in import tariffs throughout the year, sales of domestically-produced vehicles did not suffer, with sales rising 97% in 2007. Indeed, some manufacturers with local production facilities used the tariff reductions on imports as encouragement to reduce the prices of their own vehicles. However, BMI's recently published Vietnam Autos Report suggests the lower prices could be short-lived, as the government strives to contain the number of vehicles on the road and related congestion.

The country's Prime Minister, Nguyen Tan Dung, has requested a new tax policy to cope with the higher level of vehicles on the road. Although the final import tariff is as yet unknown, the Ministry of Industry and Trade has revealed that, of the ministries requested by the Prime Minister to form a new policy, some suggested a 3% increase, while others called for a return to the 70% tariff in place in mid-2007. The rate before membership of the World Trade Organisation (WTO) was 90%, which was then cut to 80% following accession to the WTO in January 2007, and reduced further to 70% by the middle of the year.

Two further cuts in H207 took the rate down to 60%.

In BMI's new Business Environment Ratings for the Asian Autos sector, Vietnam is an example of a market on the rise in the region. A newly liberated autos market has witnessed stellar growth and given the above-average rating for its potential over the next five years, sales growth should be maintained. The high score for Vietnam's competitive landscape reflects its new liberation, following a reduction of tariffs on imported vehicles, while the regulatory environment also scores highly, thanks to new environmentally-focused laws to remove old trucks from the roads. Vietnam is a country we would expect to see climb the ratings in future from its current place in 10th on 48.0.

The data for 11 foreign members of the Vietnam Automobile Manufacturers Association (VAMA) showed that Toyota was still the most popular brand in 2007, with sales of 20,113 units for a market share of 25%. This was a 36% increase on the 14,784 units sold in 2006. The strongest sales performance of 2007 came from GM Daewoo, posting growth of 364% y-o-y. Sales of 7,580 units elevated the company to second place behind Toyota, with a 9.4% market share. Japan's Honda enjoyed similar success, with a 284% rise in sales to 4,260 units, which took the company to fifth place. Aside from these exceptional results, all manufacturers recorded double-digit growth in 2007.