Tax avoiders put brakes on auto sales slump

March proved to be another dismal month for Vietnam automakers, as low consumer confidence and the ongoing economic decline kept car buyers away from showrooms.

The 17 leading domestic automakers saw sales drop by 14 percent from a year earlier, selling just 11,316 vehicles in the past month, according to the Vietnam Automobile Manufacturers Association (VAMA).

“The decrease was largely due to the passenger car segment, which saw sales drop 35 percent, and the commercial vehicles segment, which fell by 33 percent,” VAMA general secretary Pham Anh Tuan told Vietnam News on April 7.

But the overall total managed a big jump from the 6,671 vehicles sold in February and marked the highest one-month total in several months. February’s sales were down by 25 percent form a year earlier.

Tuan said sales volume in the first quarter had dropped 36 percent from the same period in 2008, particularly with a 54-percent decline in commercial vehicle sales.

“On the other hand, the SUV/MPV segment increased by 53 percent because many consumers rushed to buy vehicles with an engine capacity of over 2.0 litres – mostly SUVs and MPVs – to beat the increase in the special consumption tax on such vehicles from 30 percent to 50 percent in April,” Tuan said. “The positive movement in the SUV/MPV segment helped slow the overall pace of declining auto sales.”

Marques that are strong in SUV and MPV sales, such as Toyota and Mitsubishi, saw an overall sales growth last month, with Toyota sales up 13 percent and Mitsubishi, 60 percent.

Toyota’s Phan Hong Hai, in a phone interview on April 7, said, “I don’t think that this represents an upward trend or a brightening mood on the market. It’s simply a rush of buyers who didn’t want to pay a higher tax in April.”

Dealers confirmed that the higher special consumption tax imposed on April 1 would drive up the cost of a Toyota Innova by about US$3,500 and that of a Ford Everest by US$5,900.

Hoa Ngoc Duong, the northern director of SAMCO, a maker of trucks, buses and special purpose vehicles, said, “I believe the industry is in a bottoming-out process.”

SAMCO suffered a 27 percent drop in sales year-on-year in March, but Duong said he saw “very early indications that we have hit bottom and some optimism is starting to return to the market."

In overall sales for March, Toyota kept its top position, with 2,621 units sold (up 13 percent), followed by Vinamotor with 1,739 units (down 26 percent), Truong Hai with 1,677 units (down 23 percent), and GM Daewoo with 1,139 units (down 13 percent).

Trailing was heavy truck-maker Vinacomin-Vinacoal, with only 11 vehicles sold last month, a decline of 92 percent.

According to the Ministry Industry and Trade, Vietnam has more than 40 automakers and over 100 auto parts producers, with a total production capacity of over 200,000 units per year. There are about 1.3 million privately-owned cars on the nation’s roads, compared to over 25 million motorbikes.