The party’s over for Vietnam’s auto importers

Autos will surely be high on the list of those ‘nonessential imports’ that Vietnam aims to curb.

Prime Minister Dung has told the Ministry of Industry and Trade to work with other ministries to limit loans and dollars to fund luxury imports.

Vietnam’s bill for imported autos since January is over one billion dollars. They represent twp percent of the nation’s total imports and, unlike fertilizer, leather or electronic parts, their contribution to increasing exports is minimal.

A car importer said that small cars priced below $35,000 are selling very well, but above that level, sales are slow.

A HCM City dealer said that when the dollar surged to 19,500 dong on the free market, raising the price of each car by tens of millions of dong, a lot of buyers lost interest. The company has several hundred cars in inventory at Lotus port.

Meanwhile, commercial banks are tightening consumer credit at Government urging. Thuong (of Go Vap, HCM City), says he paid 600 million dong for a Daewoo Lacetti CDX. He could not find a domestic commercial bank that was willing to write him a loan, and was forced to go a foreign bank charging a high interest rate.

However, Thuong is pleased because he has purchased the car. Tax incentives on auto purchases are scheduled to expire on December 31, 2009.

For the first 11 months of 2009, 66,300 automobiles were imported, up 37 percent from the same period of 2008, as the Government sought to cushion the economy from the worldwide recession. The party’s over now. Saigon Tiep Thi quotes car dealers as saying that imports will plummet in months to come because banks are limiting sales of dollar to car importers.

Dealers no longer dare promise 2009 delivery of a new order; there’s not enough time left for a car to reach Vietnam by sea except possibly from Taiwan. If a buyer is intent on dodging the pending tax increase, however, he can still arrange for a car to be flown into Vietnam.

In that event, says Lam Tung, a dealer in HCM City’s District 7, the total expense will be some $6,000 higher, but in return, clients will be able to get cars just seven to ten days after they place their order. That’s cost-effective for a luxury car buyer, he insists.

Responding to the Prime Minister’s order, the Ministry of Industry and Trade says it will impose tight controls – including higher tariffs and technical barriers – on imports of luxury items such as cars, mobile phones, cosmetics and wine in the last three weeks of 2009, aiming to curb the nation’s ballooning trade deficit.

The deficit reached $10.4 billion for 2009’s first eleven months as imports outpaced exports by 20 percent.