Car sales up in Vietnam

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Higher registration, license plate fees add impetus to festival season demand


A woman pushes a cart past a car dealership in downtown Ho Chi Minh City. Local car dealerships said the market now is better than a few months ago.

For Nguyen Thi Hoa, it was the tipping point.

The 31-year-old accountant with a confectionery firm in Hanoi decided to act on a long-held desire when she heard of the government's decision to increase license plate fees for cars 10-fold to VND20 million in February.

Paying a deposit on a Toyota Corolla Altis at a showroom in Lang Ha Street, Hoa said, "I have been planning to buy a car for long time, but had not saved enough money yet. However, I do not want to wait until the fees increase, so I borrowed some money from my relatives."

A proposed hike in car registration fees to 15-20 percent of the car's value from the current 10-15 percent, and the upcoming Tet (Lunar New Year) festival has seen things perk up for the domestic auto industry.

The higher dollar exchange rate and sharp increase in interest rates had predicated a gloomy outlook for the industry, but for now, there is some cause for cheer.

Nguyen Ngoc Tu, director of the Hoang Tuan car dealership, said: "The situation now is better than several months ago, mainly because demand is increasing at Tet. Potential buyers are also deciding to order vehicles more quickly to avoid the anticipated hike in fees."

With the expected hike in fees, buyers could end up paying an additional VND60-70 million (US$3,000-3,600) for a Toyota Camry, now priced at around $50,000, Tu said. His firm has sold about 20 cars each month since last November, double that of May and June.

However, Vu Quang Tuan, head of the business department at Thang Loi car dealership, said the higher fees did not have much of a role in the recent market boost, and that the main reason was higher demand during Tet.

"The most important factor is stronger demand. The increase in fees is insignificant compared with the value of a car. If there is demand, customers will accept even higher prices," he said.

Tuan said his firm sold 40 vehicles last December, much more than a few months earlier. South Korean cars with midrange prices, from $20,000 to $30,000, were selling the most.

He said his firm has increased supply to serve increasing demand now and during the post-Tet period.

According to some car dealerships, the market now is better than some months ago, but worse than the previous Tet.

A Toyota Vietnam official said they sold 3,000 vehicles last month, a sharp increase over a few months ago, but he still estimated the demand at just 70 percent of the previous Tet.

Tu said that customers last year had to pay deposits in advance and wait for a long time to get their cars because of the high demand. However, the situation this year is quite different, with only a few customers visiting showrooms each day.

Tu's dealership now does not import any more cars, and is only selling those already in stock. The company has dozens of cars in its inventory, and Tu is finding ways to promote sales to recoup his capital.

In 2010, car imports were down 24.4 percent in value and 34.1 percent in volume over 2009, according to the General Statistics Office.

Tu said he does not expect the situation to better in 2011 in the context of higher fees, interest rates and exchange rates. At his dealership, 80 percent of his customers were paying for the cars in installments.

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