Honda prices send buyers into a spin

Vietnamese consumers will continue to be punished by the soaring prices of Honda motorbikes, due to lax market management regulations. Over the past two months, Honda Vietnam Company’s (HVN) automatic gear motorbike prices have rocketed up uncontrollably.

HVN’s proposed average price was around VND50 million ($2,564) for a newly-launched PCX motorbike and VDN31 million ($1,589) for a Honda Lead motorbike. However, the marketed price was VND65-70 million ($3,333-$3,589) for the PCX motorbike and VND38.5 million ($1,974) for the Honda Lead. Honda motorbikes currently occupy 50 per cent of Vietnam’s motorbike market.

Hoang Cuong, a representative of a Honda motorbike shop in Hanoi’s Le Duan street, said that the price had increased 20 per cent since earlier this month.

The problem was that HVN could not ask shops to reduce prices, as it directly sold its products to local wholesalers with specific contracts, Cuong said.

“Shops like us pay HVN for the motorbikes. We are HVN customers as wholesalers, not distributors for commissions. Therefore, we have no responsibility to follow HVN’s proposed prices,” Cuong said.

“What will you opt for? You perform your corporate social responsibility to reduce prices to benefit customers and then suffer from losses, or you increase prices to secure your profits, given the current economic difficulties?” Cuong asked.

Vuong Ngoc Tuan, a representative of the Vietnam Association for Consumer Benefits Protection, said wholesalers were harming consumers.

He said that Honda motorbike wholesalers were “violating” Clause 13’s articles 2 and 5 of the Competition Law, under which an enterprise, with a monopoly, was banned from imposing irrational prices for services or goods. An enterprise is considered the monopoly of a market if it either had a market share of 30 per cent or more, or is able to remarkably limit other enterprises’ competitiveness. In this case, Honda motorbikes currently occupies 50 per cent of Vietnam’s motorbike market share.

“But the wholesalers are not an enterprise subject to such a violation. Personally, I think that the state has no strict punishments for such wholesalers,” Tuan said.

Hanoi-based law firm Bross&Partners’ managing partner Tran Anh Hung said: “If Honda motorbikes’ prices are too high, consumers can boycott the products.”

According to Hung, generally, a producer’s distributor is found to violate the law when it sells products at a price higher than the producer’s posted prices, and thus, the producer must curb its distributor’s actions.

“So, the problem here is that local authorities should examine the contracts between HVN and its wholesalers. If HVN ordered its wholesalers to follow its proposed prices, but they refused, HVN would then be responsible for punishing the wholesalers,” Hung said.

HVN did not respond to VIR questions last week.

While HVN was said to be free from legal trouble, wholesalers could freely boost motorbike prices because motorbikes are at present not in the list of goods whose prices must be registered under the existing regulations.

“Local market management agencies clearly know wholesalers’ doings, but they have taken no actions. Consequently, consumers are the most burdened,” said law firm K&Associates Business Consultancy Company vice director Duong Cam.

“But consumers are also responsible, as they prefer Honda motorbikes,” Cam said.

He said there was even a big difference between posted prices and prices in invoices issued by wholesalers. In this case, while the seller could shun tax obligations via invoice-based low prices, the buyer could pay lower taxes based on such invoices when registering their motorbikes.