Vietnamese delay buying cars waiting for registration fee reduction

"The market is probably the slowest it has been since March," said Mr. Quang Khai, Director of Ford Phu My dealership (Ho Chi Minh City). "More than 40% of transactions at the dealership are pending signatures, customers are not in a hurry to issue invoices to get license plates."

According to Mr. Khai, the Government has assigned relevant agencies to study and implement the preferential registration fee for domestically assembled cars, but there is no official information yet. Many customers who buy domestically assembled cars are still waiting to make a decision.

A Toyota dealer in Ho Chi Minh City said that more than 50% of customers who buy assembled cars want to make a deposit contract but have not paid the full value of the car. There are also many customers who cannot wait any longer because of urgent needs, so they buy immediately, or pay the deposit to switch to another car of Toyota or another brand.

In early July, Mr. Vu Binh (Ho Chi Minh City) planned to pay in installments for a Toyota Vios E version worth 488 million VND and wanted to wait until the end of this month to do so. He had made a deposit to enjoy a promotion of more than 20 million VND. Binh calculated that when there was a preferential registration fee, the rolling price would decrease by about 24 million VND. Thus, the total double profit he would receive would be about 50 million VND, combining the dealer's incentives and the Government's policies.

Dealers said that customers' reluctance to buy cars immediately caused market liquidity to continue to slow in July. In the first half of 2024, sales of the Vietnam Automobile Manufacturers Association (VAMA), importers and Hyundai Thanh Cong - Hyundai car distributor, reached 159,265 vehicles, down slightly by 4% compared to the same period last year.

The 4% decline in the market over the past six months is not much. However, 2023 is the year with the lowest sales in the 2019-2023 period, so this shows that the market is facing difficulties. In particular, the psychology of customers delaying car purchases to wait for information on preferential registration fees from the Government has a significant impact on this decline.

In fact, the slow consumption of cars before each period of preferential registration fees has occurred many years ago. The head of strategic planning of a Japanese joint venture in Vietnam said that the market at this stage is like a spring. "Purchasing power is restrained because of the psychology of waiting for incentives from the government. Then, when the policy is implemented, the market will rebound and make up for the previous decline," he said.

In the dispatch dated July 21, Prime Minister Pham Minh Chinh urged the Ministry of Finance to promptly complete and submit to the Government a policy to reduce registration fees for domestically produced and assembled cars in July. This task was assigned to the Ministry by the Prime Minister to complete in May.

In the proposed plan at that time, the Ministry of Finance proposed that the Government consider not implementing the preferential registration fee policy for domestically assembled vehicles. Because recently, many agencies have asked Vietnam to explain because they believe that this policy discriminates between domestically produced and assembled vehicles and imported vehicles.

In the dossier sent to the Ministry of Justice for appraisal on July 11, the Ministry of Finance still completed the policy of reducing 50% of registration fees for domestic vehicles as requested by competent authorities. The Ministry of Finance also proposed that the Government assign the Ministry of Industry and Trade to review and propose a response plan in case Vietnam could be sued.

The Government has been implementing preferential registration fees for domestically produced and assembled vehicles for the past four consecutive years. This is considered a way to stimulate market demand, helping to increase people's purchasing power when the market is facing difficulties. This incentive does not reduce vehicle prices but reduces rolling costs.

Most car manufacturers and distributors are implementing many measures to stimulate demand in the context of slow market liquidity by reducing cash prices or supporting registration fees by 50-100%. As in previous times, when registration fee incentives are implemented, promotions from dealers or manufacturers are likely to be reduced in part or in full, depending on the actual market situation.