Vietnam auto market experienced a significant decline in the first half-year 2024 compared to the same period last year, primarily due to macroeconomic fluctuations and weak purchasing power. Many customers are delaying their vehicle purchases in anticipation of support for registration fees.
2024 is a unique year due to various factors, including the late issuance of policies to reduce registration fees, a drop in locally assembled vehicles compared to imports, and ongoing economic difficulties. These issues have caused the Vietnam auto market to struggle despite manufacturers’ efforts to reduce prices.
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Vietnam auto market’s sales declined in the first half-year 2024 despite stimulus programs
In the first six months of 2024, total sales of the Vietnam auto market reached 134,884 units, down 2% year-on-year. This includes 97,295 passenger cars (down 3%), 36,441 commercial vehicles (up 2%), and 1,148 specialized vehicles (down 4%).
In terms of origin, sales of domestically assembled vehicles decreased by 15%, while imported vehicles saw a 16% increase compared to the same period last year.
Regarding market share, sales of individual vehicle models in Vietnam also experienced a slight decline, with brands like Kia and Toyota showing significant sales declines, with Kia down 19% and Toyota down 16% year-on-year.
The Vietnam auto market is grappling with the effects of economic hardship in the first half of 2024, following a downturn due to the pandemic. Despite various promotional campaigns and significant price reductions by manufacturers and dealerships to clear inventory, attracting buyers remains a challenge.
Vietnam auto market experienced a decline in sales in the first six months of 2024 (Source: VAMA)
The reasons for the ongoing difficulties in Vietnam auto market in the first half-year 2024
Automotive production and business face challenges due to negative economic fluctuations
The lingering difficulties from 2023, coupled with unpredictable market conditions in 2024, have made automakers cautious in their production activities. Many companies of Vietnam auto market are adjusting their distribution plans and postponing the launch of new products until later in 2024. Production and assembly of vehicles in the first half of 2024 is estimated at 144,000 units, a 3.2% decrease from the same period last year.
Weak purchasing power as consumers tighten spending
A significant drop in purchasing power is partly due to declines in the real estate and stock markets, hindering recovery among high-income consumers.
Additionally, ongoing economic challenges are forcing individuals to tighten their spending, particularly on high-value assets like automobiles.
Fluctuating gold prices also make consumers more cautious about purchasing decisions, leading them to prefer safer investment channels over vehicle purchases.
Putting off buying decisions while waiting for 50% car registration fees reduction
Many customers are delaying their purchases in hopes of a 50% reduction in registration fees for domestically produced and assembled vehicles. This expectation impacts market sales, as buyers hope to benefit from combined discounts from both dealers and the government, enabling them to purchase vehicles at more affordable prices.
Observations in showrooms, particularly in Hanoi, indicate that many potential buyers are exploring options but are hesitant to finalize purchases without confirmation of the new policy.
Vietnam auto market expected to recover in the last months of 2024
Despite the challenges, there is hope for recovery in the Vietnam auto market, especially in the last three months of 2024. The official implementation of the 50% reduction in registration fees for domestically produced and assembled vehicles, effective from September 1 to November 30, 2024.
This is expected to stimulate consumption and provide financial support to consumers. This initiative aims to boost domestic sales, improve production activities, and help dealerships manage excess inventory while creating job opportunities.
Additionally, economic recovery in the latter half of the year, new vehicle launches, resolution of chip shortages, and increased demand for travel, particularly as the Tet holiday approaches, are likely to drive both the quantity and value of the Vietnam auto market upward in the closing months of 2024.
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