Boston, MA -- (SBWIRE) -- 09/14/2012 -- This year (2012) is proving a very difficult one for new vehicle sales in Vietnam. Indeed, new vehicle sales over the first half of the year have fallen by 41% year-on-year (y-o-y), to just 42,928 units, according to the Vietnam Association of Automobile Manufacturers (VAMA). Sales by VAMA member automakers totalled just 35,694 units (excluding bus chasses) for H111, with June sales by VAMA members falling by 24% y-o-y, to 5,858 units.
The main reason for the slide in new car sales has been the sharp increase in vehicle registration taxes imposed by the government since the start of the year, which has stifled demand for new vehicles. In addition, interest rates on car loans remain very high (at around 20%), despite recent cuts to benchmark interest rates, making it very difficult for Vietnamese consumers to afford car loans.
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Against this discouraging backdrop, BMI believes the time is now right to make a further downwards revision to our forecast for 2012 new vehicle sales in Vietnam. We now feel that a 26.4% fall in sales is the most likely outcome, to 80,996 CBUs. This forecast falls in line with VAMA's view that 2012 sales will total around 80,000 CBUs, implying a return to sales levels last seen in 2007. Passenger car sales will fare worse than commercial vehicle sales this year. We are targeting a 31.2% drop in passenger car sales, to 44,036 CBUs, but only a 20% drop in commercial vehicle sales, to 36,959 CBUs.
Looking forward, much will depend on the attitude of the government and whether it chooses to continue with the collection of three new charges, one of which - the road maintenance fee - reportedly came into force on June 1 2012. So far, the Ministry of Transport (MoT) has not outlined any timeframe for implementing the other two tariffs - a fee on personal vehicle users and a charge for cars entering the downtown area of cities in rush hour. However, the chairman of VAMA, Laurent Charpentier, has stated that 'this does not mean it will not eventually collect the fee'.
On the production side, we have also become more negative since our last quarterly update, in light of a March 2012 report produced by Vietnam's Chamber of Commerce and Industry (CCI), which has highlighted structural weaknesses in the country's auto sector, which will ensure a reliance on imported vehicles (see Production section for more information). This compounds the ongoing threats to the demand side of the industry, which BMI believes will create tougher conditions for carmakers.
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