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THE “BOOMING” OF VIETNAM’S AUTOMOBILE CONSUMPTION Q1/2022 – A “SPECTACULAR RECOVERY” OF AUTOMOBILE INDUSTRY

The pandemic has severely impacted the “four-wheeler” industry after four outbreaks. During the current pandemic period, automobile companies’ production and business activities were holding up. However, as soon as Vietnam’s economy opened up, automobile makers, dealers, and customers quickly adapted and returned production and trade operations to the “new normal” trajectory. With a healthy market scenario in the latter months of 2021 and spectacular industry outcomes in the first quarter of 2022, Vietnam’s automobile consumption in Q1/2022 indicates tremendous recovery potential and total prospects after two years of stagnation.

 

 

 

 

 

The automobile industry is on the recovery path

“Surprising” automobile industry statistics

The revenue of the Automotive market increased dramatically in Q1/2022 compared to the same period in 2021. According to the Vietnam Automobile Manufacturers Association (VAMA), automobile sales in March 2022 increased by 60% over February 2022. In Q1/2022, VAMA member units sold 90,506 automobiles of all types, up 27% from the same period in 2021. Specifically, there was a 39% increase in passenger cars, a 7% increase in commercial vehicles, and a 32% increase in specialist vehicles. Regarding vehicle origin, sales of domestically produced automobiles climbed by 34% by the end of March 2022, while imported cars only increased by 17% over the same period the previous year.

 

Vietnam's-automobile-consumption-growth

Sources: VIRAC, VAMA

 

Besides, according to Vietnam’s automobile consumption in March 2022, most VAMA members experienced significant growth in March 2022 compared to the same period in 2021. Demand and purchasing power have significantly improved after Covid. These clear signals indicate that the car market has a considerable recovery potential after two difficult years due to the Covid-19 epidemic.

 

Vietnam's-automobile-consumption-revenue

Sources: VIRAC, VAMA

 

Driving forces of car consumption in 2022

Thanks to the government’s timely adoption of epidemic prevention measures, Vietnam’s economy has been reopened since the end of 2021. Also, auto dealers have resumed operations at the same time. As a whole, the automobile industry had impressive growth in Q1/2022. After months of social distancing, consumer desire for travel has increased. That has led to the increasing number of customers visiting the dealership to pick up pre-ordered vehicles and purchase autos. As a result, Vietnam’s automobile consumption increased significantly.

 

Furthermore, due to the absence for an extended period and the drop in shopping demand following the Lunar New Year, many domestic vehicle dealers have used various promotions and incentives to increase sales, drive demand, and boost profits. Mazda, Suzuki, and Hyundai are some of the brands that have successfully implemented these strategies. Thanks to the simultaneous significant reductions, the brands completed Q1/2022 with more substantial business results.

 

Due to incentive programs and the government’s policy of a 50% reduction in registration fees for domestically built cars, consumer purchasing power has “exploded” in Q1/2022. Accordingly, Decree 103/2021/ND-CP was issued and takes effect from December 1, 2021, to May 31, 2022; the initial registration fee for cars and trailers or semi-trailers towed by cars and similar vehicles manufactured and assembled domestically is equivalent to 50% of the registration fee rate, specified in Decree No. 20/2019/ND-CP. This is the second time in the past two years that the Government has issued a policy to reduce registration fees by 50% for domestically assembled and manufactured cars.  Previously, from June 28, 2020, to December 31, 2020, the policy of a 50% reduction in registration fees was implemented, assisting the Vietnamese automobile industry to have a strong recovery.

 

According to VIRAC’s forecast, the long-term prospects of Vietnam’s automobile industry are also optimistic, owing to the country’s low rate of car ownership in Vietnam and the government’s measures supporting interest rates to assist people in obtaining loans to purchase cars. Furthermore, rising middle-class income and increased investment in transportation infrastructure are both aspects that will benefit automobile companies in 2022.

Popular automobile trends in 2022

A new start with the trend of the Electric car

Electric automobiles have become a worldwide trend in recent years. According to the International Energy Agency (IEA), global electric vehicle sales reached 6.6 million cars in 2021, more than twice 2020 (3 million cars), quadrupling those of 2019. This corresponds to a 9% market share of all vehicles sold worldwide. A significant “boom” in the electric vehicle category will be inevitable.

 

Vietnam's-automobile-consumption-dien

 

Electric vehicles are progressively drawing the attention of Vietnamese consumers.  As a result, 2022 is expected to be the year when domestic car buyers become more familiar with electric vehicles. From 2022, numerous models and designs of electric automobiles will be available for sale by car manufacturers and traders in Vietnam, no longer “scarce” as they were previously. Typically, many Vietnamese customers are looking for the VF e34 electric car and the VinFast duo VF8 and VF9.

 

In the luxury car segment, Lexus and Volvo have developed Hybrid automobiles, which combine petrol and electric motors,  while Porsche has released the Taycan electric car type for sale. To meet the needs of electric vehicle consumers, the system of charging stations for electric cars has become more prevalent in many provinces and towns around the country. Experts predict that 2022 will be a promising year for the development of the Vietnamese electric vehicle market.

Small SUV – the perfect choice for urban areas

Most notably, SUVs “wasted upstream” unexpectedly during the pandemic, while other Vietnam’s automobile consumption decreased. Accordingly, by the end of 2021, the entire urban SUV segment has sold 47,216 vehicles. This car segment marked a record increase of 22,847 vehicles sold compared to 2020, equivalent to nearly 94%. Furthermore, 2022 is expected to be a “golden year” for the urban SUV segment, with a series of new models set to hit Vietnam’s market. Many well-known automotive brands, such as KIA, Toyota, and Hyundai, have announced plans to produce and distribute additional SUV models. The heat of this national automobile trend will be maintained in 2022.

 

With the introduction of new models and a slew of brand names currently on the market, the urban compact SUV class is expected to have a spectacular year in sales, becoming one of the fastest-growing categories globally.

 

Vietnam's-automobile-consumption-suv

 

B – Class Sedan – a sustainable choice

Despite the broad competition in the automobile market in terms of models, B-class sedans are expected to attract a high number of buyers and become the best-selling car segment in 2022. Most models in this sector, such as the Honda City, Hyundai Accent, Toyota Vios, Mazda2, and others, have been disseminated and modified in the last two years to strengthen their attractiveness to consumers in Vietnam.

 

Vietnam's-automobile-consumption-sedan

 

B – Class sedans have long been the favored car sector of Vietnamese consumers, with various models and selling prices ranging from 400 to 600 million VND. Furthermore, the B-class sedans’ design is versatile enough to appeal to many clients and applications. The engines in most B-class small sedans are between 1.4 and 1.6 liters. As a result, it makes it simple for people to handle and use and improves fuel economy. With all of these advantages, the B-class sedan is unlikely to be called “outdated” in the Vietnamese automobile market for a long time.

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