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New vehicle sales in Vietnam surged 18.6% y/y in June to 27,520
units, according to data released by the Vietnam Automobile
Manufacturers' Association (VAMA). This figure includes locally
produced passenger vehicles, CVs, and SPVs from 20 VAMA members, as
well as completely built-up (CBU) imports, but excludes bus chassis
units. SPVs are either passenger vehicles or CVs already fitted out
for their purpose; therefore their volumes are amalgamated into the
total vehicle market. Passenger vehicle sales in the country during
June jumped 31.5% y/y to 20,287 units and CV sales decreased 9.0%
y/y to 6,649 units. Sales of SPVs fell by 23.5% y/y to 584 units
during the month.
Meanwhile, sales of locally built vehicles increased by 22.2%
y/y to 26,207 units in June, with passenger vehicle sales at 19,725
units (up 33.3% y/y) and CV sales remaining flat at 6,270 units.
Within the CV category, sales in the truck segment increased 2.2%
y/y to 5,426 units, while sales of buses went down by 12.3% y/y to
844 units. Sales of SPVs slumped 44.9% y/y to 212 units.
During the first half of 2019, sales of locally produced
vehicles in the country were up 18.4% y/y at 145,811 units, with
passenger vehicle sales up 32.8% y/y at 109,423 units and CV sales
down 5.9% y/y at 34,581 units. Within the CV category, sales in the
truck segment declined 2.8% y/y to 30,131 units, while sales of
buses were down 22.5% y/y at 4,450 units. SPV sales in the period
plunged 54.7% y/y to 1,807 units. Total industry sales during the
January-June period were up 21.3% y/y at 154,273 units. Total
passenger vehicle sales during the period grew 34.6% y/y to 113,155
units, while CV sales stood at 38,071 units (down 1.5% y/y) and SPV
sales fell by 32.1% y/y to 3,047 units.
Outlook and implications
The surge in new vehicle sales in Vietnam during the first half
of 2019 can be attributed to strong growth in passenger vehicle
sales thanks to the reduction in SCT and a low base of comparison.
However, sluggish demand for CVs and SPVs did weigh down on the
first-half results somewhat. Beginning in 2018, the Vietnamese
government reduced SCT on vehicles with an engine size of 2.0
litres or less by 5%. The government also reduced import tariffs on
automotive components from the Association of Southeast Asian
Nations (ASEAN) region to 0%. Therefore, the average tax on
automotive components is now about 5%, down from 15% last year,
resulting in lower production costs and hence vehicle prices.
IHS Markit expects light-vehicle sales in the country, including
passenger vehicles and light commercial vehicles, to be driven in
2019 by the reduction in the SCT, new model launches, the expansion
of the dealership network in the country, and an improvement in the
economy. Industrial production will continue to play an integral
role in driving Vietnam's economy. Given the country's large labour
force, relatively low wages, and favourable geographical location,
we project a healthy pipeline of foreign direct investment (FDI)
inflows in the near to medium term. We anticipate that Vietnamese
real GDP growth will average 6.7% during the next few years. We
expect the Vietnamese light-vehicle market to grow by around 12.7%
y/y to 286,281 units in 2019.
Sedans will remain the most popular body type in the country in
2019. They are popular among Vietnamese consumers as they are
perceived as conferring a higher social status. However, this
segment is expected to witness only moderate growth of 1.7% y/y to
93,492 units this year, giving it a market share of 32.7%, mainly
due to the growing popularity of sport utility vehicles (SUVs).
Automakers plan to bring out new SUVs in Vietnam in a bid to tap
into this growing opportunity. Our data show that around 11 new or
refreshed SUVs will be launched in Vietnam in 2019. Hatchbacks will
follow as the third-largest category in 2019 with a market share of
14.4% and sales of 41,327 units, up 22.1% y/y.
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