Why the automobile market seeing many sales?

The auto market is witnessing an abundant supply and a variety of newly launched models. Photo: Nguyen Ha

Good consumption

According to a report by the Vietnam Automobile Manufacturers Association (VAMA), in May 2021, automobile sales across the whole market reached 25,585 vehicles, down by 15% compared to April but up by 34% compared to same period in 2020.

This result is considered good in the context that the Covid-19 pandemic continues to negatively affect production and business activities in many categories; the global auto industry is also facing a severe shortage of chips.

Regarding why cars are still selling well in May and the first five months of 2021, an expert said: Firstly, the amount of money tends to be "excessive" when interest rates on bank deposits are currently low. Especially the stock market rallied. Many investors take profits, and transfer money to buy real estate and cars.

Secondly, it is estimated that in the first half of 2021, the number of imported cars of all kinds to Vietnam will reach 78,000 units, worth USS$1.79 billion, up by 92.1% in volume and by 94.7% in value compared to the same period in 2020.

The number of imported cars has skyrocketed in the past few months, especially in March (approximately 17,000 vehicles), leading to a large supply of cars.

Thirdly, the fear of the pandemic leading to high inventory (in April, the number of cars sold began to decrease), a number of new models were released (in May and early June, the auto market received eight new models such as: Hyundai Santa Fe, Nissan Navara, Lexus LM350, Audi Q5), while companies rushed to apply promotions and discounts to stimulate demand.

Not only price incentives, car dealers also carry out many gift giving and customer care activities. Photo: Nguyen Ha

Discounts on many car models

The Vietnamese auto market is recording the deepest price drop since 2017 (when the market froze waiting for the import tax to be reduced in 2018).

In May and June, the retail prices to consumers of many popular car models are decreasing compared to the listed prices with various promotions and incentives.

For example, Subaru continues to maintain a discount program for the best-selling model Forester with the retail price of the Forester i-L version reduced by VND159 million (to VND969 million); Forester i-S and Forester i-S EyeSight also reduced by VND99 million and VND79 million, respectively (to VND1,119 billion and VND1,209 billion).

Ford also applied a strong discount on the 7-seater SUV Everest. Titanium 4x4 AT version reduced by VND95 million (to VND1,304 billion); Titanium 4x2 AT version has a discount of VND65 million (to VND1,116 billion); Sport version reduced by VND45-55 million (to VND1,057 - 1,067 billion).

At the dealership, the retail price of most other Ford models is also decreasing compared to the listed price. For example, EcoSport reduced the price by VND30-46 million for the 1.5AT Titanium and 1.0AT Titanium versions (to VND646 million and VND686 million, respectively).

Although Hyundai has not directly announced a discount from the manufacturer, in fact, the distribution system is maintaining prices with customers that are VND5-40 million lower than the listed prices for Tucson and Kona models and Elantra.

Surveys from dealers show that Mazda models are currently being heavily discounted by the dealership system. For example, Mazda3 has a retail price lower than the suggested price of VND20-60 million. Other Mazda models have lower discounts, only from VND10-30 million depending on the model and version.

Almost all Kia models are offered at a discount of VND10-25 million directly to customers. Particularly, the high-end Sedona MPV model is currently discounted by VND40-60 million.

The direct retail price of most Honda models is currently reduced by VND15-25 million compared to the listed price. Models such as HR-V, CR-V or Civic have a reduction of VND40-65 million.

Mitsubishi continues to maintain the preferential content applied from before.

Accordingly, the best-selling car model is Xpander, which is currently being discounted by dealers by VND25-30 million, two SUV models Outlander and Pajero Sport are reduced by VND35-40 million while Attrage model is reduced by VND10-15 million.

The retail price directly at the dealership of most Suzuki models is currently VND15-30 million lower than the previous suggested price of the company.

Volkswagen is also applying a promotion for customers to buy the Tiguan Elegance model (with a gift package of accessories worth VND100 million) and Polo hatchback (with a material insurance package worth VND11 million).

In July, the promotional discount program continued to be extended by Toyota Vietnam. This joint venture applies a registration fee support program (equivalent to VND20-30 million) for its best-selling model, the Vios. In addition, consumers who buy Toyota Vios in installments will also receive a preferential interest rate of 2.99%/year for the first six months. Buyers can also be applied by Toyota dealers for additional gift packages worth VND10-15 million.

Along with Vios, many other models such as Corolla Altis, Camry, Fortuner or Innova are also being discounted by dealers from VND15-40 million.

Equally, Honda Vietnam also supports 100% of the registration fee for customers who sign a CR-V contract in July. Thus, the buyer will save from VND99-113 million (depending on the version). In addition, dealers also offer cash discounts and accessories for those who buy CRVs. The incentive program has a value ranging from VND100 - 150 million.

It is forecasted that in the last six months of the year, the car market will not be as attractive as before, and the price reduction trend will soon end.

Lots of bad developments

Representatives of many firms said that the moves to reduce prices and incentives are to stimulate purchasing power in the context of the complicated development of the Covid-19 pandemic. However, this is only part of the reason. In fact, the supply of cars arriving here will not be so abundant.

For example, the source of imported CBU cars is showing signs of decreasing.

According to the latest statistics of the General Department of Customs, in June 2021, the number of imported cars reached about 12,000 units, the value reached US$85 million, down by 23.1% in volume and 23.6% in price compared to the previous month.

Along with that, domestic production is forecasted to be difficult when the lack of semiconductor chips for automobile assembly production has been occurring globally and Vietnam is no exception.

This shortage of semiconductor chips will continue until the end of this year, possibly even into 2022 and this will affect the business activities of car manufacturers and the automotive market. It will be difficult to grow as expected.

The price reduction is caused by the fact that 2021 is the year when many models have reached the end of their life cycle and are about to release a new generation of models, dealers quickly reduce prices to discharge old cars and welcome new cars.

On the other hand, the Covid-19 pandemic in the world is still complicated, which will have a long-term impact on people's income and car buying needs, dealers are taking advantage of the time when the demand for cars is increasing thanks to the increase in securities and low deposit interest rates to boost sales.

It is forecasted that in the last six months of the year, the auto market will no longer be as attractive as before, and the price reduction trend will soon end.