Motorbikes costly despite surplus

Vietnamese consumers continue to face high sticker prices for motorbikes despite an abundant supply and tax benefits for businesses that offer domestically manufactured units.

Figures from the Ministry of Planning and Investment's General Statistics Office showed that in the first 10 months of this year, the country produced 3.37 million motorbikes, representing a 20 per cent increase over the same period last year.

Last month alone, nearly 399,000 motorbikes were produced domestically, a 26 per cent year-on-year increase.

However, purchases of new motorbikes fell by 18 per cent so far this year, boosting inventory in the 10-month period to 50 per cent over the same period last year.

At the same time, several motorbike manufacturers have expanded production and increased productivity despite low market demand.

Honda Viet Nam, which occupies 60 per cent of the market share, has invested US$70 million in two factories in northern Vinh Phuc Province to increase productivity from 1.5 to 2 million units per year and announced plans to build a third factory in Dong Van 2 Industrial Park in northern Ha Nam Province.

The $120 million factory is expected to bring the company's total yearly capacity to 2.5 million.

Japanese Yamaha Company also decided to invest more than $30 million to expand its factory in Viet Nam, increasing its productivity to 1.5 million units per year, while Italian Piaggio Viet Nam Company expanded its factory in April to increase production by 300,000 motorbikes annually.

The Ministry of Industry and Trade estimated that by the end of next year, the country's total yearly capacity for motorbike production would be five million units, resulting in a saturated market in upcoming years.

The rate of motorbike production in the country has increased rapidly, by 50 per cent or even as much as 80 per cent as is the case for some Honda brands.

However, none of the motorbike producers announced price reductions even though supply is higher than demand and they have enjoyed high profits as a result of tax benefits.

The Finance ministry stipulated that businesses with a stock made up of 60 to 70 per cent domestically produced motorbikes would only be required to pay a 10 per cent tax on imported spare parts. In turn, enterprises with only 20 per cent of their stock coming from domestic producers would have to pay a 60 per cent import tax for spare parts.

These savings have not been passed on to consumers, whose only option is to purchase high priced motorbikes.