Year-end paradox: car manufacturers reduce prices to stimulate demand

The car market is freezing with so low demand that even sale promotion campaigns and price discounts cannot help boost sales.

Unlike previous years, it is still quiet in the year-end sale season. Even the information about the possible car registration tax increase to 20 percent cannot help encourage people to buy cars at this moment. In general, people rush to repair houses and buy cars to celebrate Tet. However, they do not intend to do these things now, even though Tet will come just after two months.

Buying used cars, leasing cars

Instead of buying brand new cars, a lot of people now think of buying used cars or nearly brand new cars to avoid the high car ownership registration tax.

Analysts say that if buyers can buy the cars with the mileage of less than 20,000 kilometers, they would be able to save 100 million dong in comparison with buying brand new cars. In current circumstances, 100 million dong is really a considerably big sum of money.

The overly high prices of cars due to the tax increases and the economic downturn both have led to the sharp falls of car demand. Meanwhile, HCM City authorities have threatened to collect annual fees from car owners, which has made a lot of people hesitate to buy cars.

Nguyen Thanh Phong, Director of an electronic equipment company, has signed the contract on leasing a Camry 2.4. He said that if buying a brand new import car, he would have to pay 1.2 billion dong. Now he spends 16 million dong a month for leasing the car. The expenses for buying a brand new car and leasing a car are nearly the same. However, if leasing car, he does not have to pay for amortization, car maintenance, and driver hiring.

Car suppliers rush to reduce prices

Phung Van Minh, a sales officer of Vidamco’s branch in HCM City, said that domestic manufacturers all offer price reductions or reduce prices through sales promotion campaigns, lucky draws or gifts, but the demand is still very low.

Vidamco is now running the second sales promotion campaign in the last two months. One year ago, buyers had to pay a deposit for Captiva model one year in advance. Meanwhile, the price of Captiva has dropped by 1000 dollars per product, and Vivant price has dropped by 700 dollars.

Mercedes, the leading luxury car brand in Vietnam has announced the price discount program to be applied until the end of November 2011, offering the price discounts of 2 percent for C200BE, C300AMG, E200BE, 4 percent for E250BE, E300, and 5 percent (40 million dong) for GLK300.

Sales agents of Toyota Vietnam are offering to give insurance premiums, prop up 30 percent of car ownership tax to customers in order to attract more buyers. Those, who buy Innovas, the new version which was launched into the market in September, also get the gift of a CD player worth 800 dollars. The information about the gift not only shown on the notice hung on the wall of the showrooms, but also sent by messages to every customer.

Euro Auto, the importer and distributor of BMW cars in Vietnam, has also offered the prop-up package worth 5 percent of the cars’ values, applied to X1 and 325i models. Besides, it offers insurance premiums for 320i, 5 series, GT, X5, X6 models, and other special sale promotion packages valued at 400 million dong for BMW Series 7. The program will last until December 14, 2011.

Ford’s and Renault’s offer smaller gifts, but they are also very attractive. The buyers of Renault Fluence would be given an iPad 2 worth 13 million dong, while the buyers of Ford Mondeo and Everest would get interest rate prop-ups.

The low demand not only has been seen with domestic cars, but with imports as well. According to the HCM City Customs Agency, very few cars have got customs clearance over the last few weeks, and that the imports have decreased by 90 percent.