Auto sales drop hits tax revenues

State budget revenues from the automotive sector are predicted to further dip as auto sales in April dropped substantially, according to a report by the Vietnam Automobile Manufacturers Association (VAMA).

In particular, 6,982 vehicles, consisting of 5,504 locally-assembled cars and 1,478 imported ones, were sold in April, dwindling 24% against the preceding month and 46% year-on-year. Some 2,390 sedans and 4,580 trucks were consumed, sliding 26% and 22% over the month before respectively.

Overall, more than 29,500 vehicles were sold in the first four months, including 5,400 imported cars, a year-on-year decline of 42%. Notably, sedan consumption plunged by a considerable 49%, while truck sales recorded a drop of 36%.

Of the total vehicles sold in Jan-Apr, 76% is locally assembled and the remainder is imported. Given the drastic sales slump in the last months, auto firms said they have to scale down their production.

At a recent meeting, VAMA members expected auto consumption to reach 130,000-140,000 units this year. However, up to this point, the market is forecast to fall to 100,000 units.

Several auto traders hold a more pessimistic view, predicting that their sales would plunge by a half this year.

Based on the actual sales record in April, the total sales volume of the entire industry calculated on the Seasonally Adjusted Annual Rate (SAAR) will likely slide to 81,000 units, equivalent to that in 2007.

The market in 2011 went down 5% against 2010, with 138,000 vehicles sold. The last two months of that year saw sales growth as consumers rushed to buy cars to avoid a registration fee hike applicable as of early 2012.

VAMA said the auto market prospect was dismal because high volumes of unsold vehicles forced local producers and assemblers to cut down production. Meanwhile, auto dealers are facing financial problems due to an increasing buildup of inventories.

The automotive industry has been a major contributor to State budget revenues but now the situation has changed.

Compared to the same period in 2011, auto sales in Jan-Apr this year decreased by more than 21,300 units. With a car worth an average VND500 million, it is forecast that State budget revenues would fall by an estimated VND60 trillion, or US$290 million, this year.

Although the market is going downhill, most producers and assemblers plan to launch more new car models into the local market.

According to VAMA, customers are hesitant to buy cars because of the registration fee hike of 15% and 20% in HCMC and Hanoi respectively. Meanwhile, the personal vehicle restriction fee to be released soon and the high lending rates of 18-20% per year are the factors that discourage people from owning cars.