Import car market sinking fast

The General Department of Customs has asked importers of less-than-16 seat passenger cars to show certificates on quality examination, technical safety and environment protection to get customs clearance. The request has “poured a ladle of cold water” over the import car market.

The import car market has been gloomy for many months. At first, the dollar price increase made cars more expensive. Then, Vietnamese people avoided big purchases in the seventh lunar month, called the “month of forsaken spirits”.

Car dealers hoped that the market would pick up after the seventh lunar month, but the new decision by the General Department of Customs (GDC) has dampened their enthusiasm.

According to Hoang Thuc, a high ranking consultancy expert from GM Daewoo, the new requirements would make import car prices increase by $1000 each. The decision will make car importers “pull back” in importing autos, leading to a more limited supply. Besides, it will cost importers more to follow the new procedures, which also means higher car prices.

“The door for car importers and dealers has been narrowed,” commented Duc from Thanh Nam Car Showroom in Hanoi, which specializes in imports.

Too many factors have blocked auto imports, he continued, including car ownership registration tax, banks’ credit tightening, economic difficulties, sharp appreciation of the dollar, and now the new GDC requirements.

According to Duc, the import car market began falling in April 2010, when the Ministry of Industry and Trade decided to put cars on the import restriction list. Also, handling fees have increased by $130 per container. Moreover, importers previously could get customs clearance first and then pay tax later, but now they must pay beforehand.

Duc estimated that, since March 2010, his showroom sold only several cars a month, whereas in previous years, he could sell tens cars a month.

Pham Minh Tuan, Director of Hoan Cau Automobile Company, has also complained that it is getting more and more difficult these days to do business.

In the months between March and June, his company sold only three cars a month, just 1/10 compared to the same period of 2009. The number sold in July was even lower, because people did not buy during the unlucky month.

Low demand has led to overstocking. Some firms have reportedly housed hundreds of cars since 2009. Business Director of An Hung Car Leasing Company Nguyen Manh Huong related that the owner of a car showroom in Tay Ho district has endured big difficulties in the last months. Despite a lot of promotions, he still cannot cars while he must pay interest on bank loans, estimated at two billion dong a month.

According to Huong, the majority of car importers must borrow money from banks to import cars. Commercial banks, when disbursing money, keep documents on the cars. When someone buys a car, importers must go to the bank to retrieve the documents.

“All car importers owe banks. No one has enough money to import cars,” he claimed.

According to GDC, the number of imports has been decreasing considerably as the result of efforts to curb Vietnam’s trade deficit. In July 2010, Vietnam imported 4400 cars, a decrease of 3.6 percent over June. In the first seven months of 2010, import totals were 23,900 autos, worth $494 million, much lower than that of the same period of last year.