Proposal to boost auto demand

The Vietnam Automobile Manufacturers’ Association (VAMA), Vietnam Association of Mechanical Industry (VAMI) and the governments of Ninh Binh and Quang Nam provinces have proposed the central Government halve the registration fee for locally assembled or manufactured cars during the first half of the year to boost market demand.

In a letter sent to Prime Minister Pham Minh Chinh, they also asked for an extension of the deadline to pay the special consumption tax for the January-June period.

The proposal was made amid bleak business conditions, which have resulted from difficult access to bank loans, high interest rates, market liquidity problems and rising auto inventory. According to VAMA, automobile sales in January plunged by 60% over December last year and 54% against the year-ago period to just over 17,850, with around 9,230 locally assembled cars.

The Vietnam Association of Mechanical Industry attributed fewer new orders in the mechanical engineering and supporting industries to the steep fall in car sales, saying automakers may resort to mass layoffs if business conditions remain gloomy. The two associations said without the Government support, businesses’ efforts alone would be inadequate to revive the market, which needs a stimulus package like the one launched in 2021-2022. They are concerned that without timely support policies over the short and medium terms, the local auto market may face a loss of 37% in sales over the next five years, equivalent to 1.8 million vehicles, and the long-term target of exporting 90,000 cars and US$10 billion worth of auto parts by 2035 would be hard to achieve. In December 2021, the Government issued a resolution to reduce the car registration fee by 50%. The fee cut came after the fourth wave of Covid-19 had inflicted heavy damage on almost all sectors of the economy, including the automotive industry, and helped auto sales bounce back.