Domestic car market sees sluggish sales in year-end sale season
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While normally a positive time for car sales, this year the domestic automobile market is seeing gloomy days as Tet (Lunar New Year holiday) approaches.
Sale manager of a Hyundai showroom Van Nam said since the end of the second quarter this year, car loans from commercial banks have had an interest rate of 13-15.5% a year, while car loans during the Covid-19 pandemic were between 9.5-9.9% a year.
Car loans offered by foreign banks in Vietnam are between 10-11% per year, however, lending procedures are very strict, and borrowers must have high incomes and their salary must be paid via banks.
His showroom’s car sales have decreased by about 40% from the beginning of this year, Vietnam News Agency quoted Nam as saying. His showroom set a target of selling 200 units in December, but it has been hard to achieve it.
Dinh Hung, a car trader, said used car sales have been gloomier. Since he started trading used cars, this has been the bleakest time. Hung attributed his slow sales to higher interest rates and tightening credit. He complained that he had to borrow money from banks for his business, and it was very difficult to pay off his loans as his used cars have gone unsold.
Sharing the same view, car dealer Nguyen Quyet said in the first months of this year, the used car market was boisterous and many used vehicles were even sold at higher prices than new cars due to global supply shortages. Contrary to early months, the year-end used car market is quite gloomy.
The sluggish sales are attributed to a tightening credit market and higher interest rates.
Tran Duc Hung, a Hanoi resident who is planning to purchase a vehicle, found himself wondering whether he should opt for a new car or not. Hung said that if he bought a new car, he would have to borrow about VND400 million ($16,670) from a commercial bank for a term of five years.
With this loan, his car would end up costing an additional VND130 million due to bank interest.
“His showroom’s car sales have decreased by about 40% from the beginning of this year, Vietnam News Agency quoted Nam as saying.”
Nguyen Van Thang, an owner of a car dealership on Le Van Luong street, said most banks do not give priority to car loans while interest rates are quite high. This factor greatly affected the car market in general and used cars in particular, especially luxury and expensive ones. Car traders had to reduce prices in early December to lure customers.
Nguyen Van Nam, sale manager of a Hyundai showroom in Hanoi, said that in December, he lowered prices by between VND15-30 million ($625-1,250) of popular Hyundai models such as Accent, Grand i10, and Elantra.
Le Thai Son, a car salesman at a Honda showroom in Cau Giay District, said the prices of many Honda models were reduced, for instance, the Honda CR-V at this time would get an attractive discount of between VND70-90 million.
Toyota Vietnam has offered a promotion campaign for models such as Veloz, Vios, or the 7-seat MPV segment with discounts of VND30-40 million. Meanwhile, many dealers have launched promotions by offering free registration or direct discounts on price.
November auto sales posted a decline from October after four consecutive months of growth, but sales for the year so far have still achieved double-digit growth.
According to the Vietnam Automobile Manufacturers Association (VAMA) report issued on December 13, automobile sales including imports were down 5.9% year-on-year to 36,371 units in November. CKD volume reached 18,813 units and CBU volume was 17,558 units.
Total sales in the first 11 months this year rose 43% year-on-year to 369,334 units. Of that total, sales of CKD vehicles reached 208,822 and those of CBU imported vehicles reached 160,512 units.
Questions & Answers
Q.What is the main reason cited for the current sluggish car sales in the domestic market?
What is the main reason cited for the current sluggish car sales in the domestic market?
Sluggish car sales are primarily attributed to a tightening credit market and significantly higher interest rates on car loans. Commercial banks are charging 13-15.5% interest, a notable increase from the pandemic period's 9.5-9.9%.
Q.How have car dealerships responded to the difficult market conditions as the year-end approaches?
How have car dealerships responded to the difficult market conditions as the year-end approaches?
Car dealerships have responded by reducing prices on popular models and offering promotions. Hyundai, Honda, and Toyota dealers, for instance, have lowered prices by tens of millions of VND, and some offer free registration.
Q.How much more would a buyer like Tran Duc Hung expect to pay in total for a new car loan compared to the principal amount?
How much more would a buyer like Tran Duc Hung expect to pay in total for a new car loan compared to the principal amount?
Tran Duc Hung would expect to pay an additional VND130 million in bank interest on a VND400 million loan for a new car. This interest makes the overall cost of the vehicle substantially higher over a five-year term.
Q.What is the year-to-date sales performance for the domestic automobile market despite the recent downturn?
What is the year-to-date sales performance for the domestic automobile market despite the recent downturn?
Despite a November decline, total sales for the first 11 months of the year still show strong growth. Overall sales rose 43% year-on-year, reaching 369,334 units, indicating double-digit growth for the year so far.