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Vietnam - Planned Tax Increment Push Car Sales Up
Aug 12, 2008

The Vietnamese car industry experienced high sales growth in January-May 2008 due to planned tax hike on car import, rising demand and changing lifestyle of people.

Vietnam saw a two-fold rise of astronomical 162% in car sales in the initial five months of 2008 (Jan-May 2008) against the corresponding period last year (Jan-May 2007), according to the Vietnam Automobile Manufacturers Association, as reported by
REUTERS.

The association revealed that the total sales of 16 car manufacturers in the country surged to 58,860 cars in first five months of 2008. In May 2008, the sales rose twice to 11,494 cars from the same month last year. Moreover, the import of cars in Vietnam from January to May 2008 escalated by staggering 292% to $1.31 Billion, in which the number of completely assembled vehicles increased six times to 35,400.

The rise in car sales in Vietnam during the review period was primarily due to buyers’ reaction against the planned increase in tax on car import. Also, the government has decided to increase the registration fees from current 5% to 15% in coming months to make people buy less number of cars so that congestion on road can be decreased. Consequently, the sales of vehicles in Vietnam surged ahead of tax hike.

Furthermore, change in lifestyle and standard of Vietnamese people with rising income and high economic growth also increased the sales of cars. The recent increment in salary of people along with high employment rate increased the consumer spending and people spent liberally on luxury items, including cars.

Apart from these, other important reasons for high growth in car sales in the local market were advanced technology, hi-tech functions of cars and improvement in infrastructure in the country. As the country’s economy is rapidly growing, the impact of growth reflects on improved road infrastructure that made driving easier in the country. New technologies like fuel-efficient engines and attractive car models are also encouraging people to spend in Vietnam automobile industry.

A Research Analyst at
RNCOS said, “The Vietnamese car industry grew significantly in the first five months of this year due to the consumers’ need to avoid planned tax hike on car import and rising purchasing power of consumers. This will also increase competition in the industry that is also good for the economy of the country.”

Related Market Research Reports:
Vietnam Automobile Industry Forecast (2007-2010)
Indian Automobile Sector - A Booming Market
China Automobile Sector to 2010