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How does COVID-19 affect the automobile industry in Vietnam?

How does COVID-19 affect the automobile industry in Vietnam?

Friday 14, 08 2020
After the first six months of the year, the business was sluggish, production activities were stagnant, domestic automobile manufacturers were very excited when the Government reduced registration fees by 50% and prepared to extended excise tax payment deadline.

Hope that there is no social distancing in order to restore production

With the automobile industry, after the social gap ended in April, most dealers and businesses were back to operation. However, according to a survey by the Ministry of Industry and Trade, the production and assembly capacity is currently only maintained at a very low level due to the high inventory of vehicles, up to 122.5%. The main reason is that automobile consumption is facing many difficulties due to the sharp decline in domestic purchasing power.

On August 6, sharing with Tien Phong, Mr. Nguyen Trung Hieu, Head of Policy Department of the Vietnam Automobile Manufacturers Association (VAMA), said that the COVID-19 translation returned with unpredictable developments. Enterprises are still both producing and listening to the situation to adjust their production and business plans accordingly.

Hope that there is no social distancing in order to restore production

According to Mr. Hieu, in the immediate future, auto enterprises in two localities Da Nang and Quang Nam are first affected such as Truong Hai Auto Company (THACO), and Tan Chong Motor has an automobile factory in Quang Nam. THACO contributes up to 55% of the budget for Quang Nam province. That is the reason that the leader of this provincial People's Committee recently said, may have to take into account the proposed plan not to regulate the budget to the Central and return to apply for subsidies from the central.

Also due to the influence of COVID-19, Vietnam Motor Show 2020 - the country's largest auto festival jointly organized by VAMA and Vietnam Automobile Importers (VIVA) once a year, attend This last October ant was canceled.

Ford Vietnam is one of the most damaged companies in the automotive industry due to the COVID-19 outbreak. The Ford factory in Hai Duong has just received an additional investment of $ 82 million to expand its scale since the beginning of the year. 2020, expected to be completed by mid-2022. Due to the impact of the COVID-19 pandemic, from March 27, production activities have to be halted to distance society, many foreign experts have yet to come to Vietnam. After the pandemic had subsided, the factory was back into operation in mid-July.

However, according to Ford's regulations in the US that apply globally, most of the office workers in Vietnam are working from home. Mainly, the production, sales, and service departments are still operating and must fully apply the COVID-19 pandemic prevention regulations, ensuring safety for everyone.

Commenting on the Government's move to reduce registration fee by 50% since the beginning of July, about to extend the deadline for paying special consumption tax (SCT) for domestically manufactured and assembled cars, representative of Ford Vietnam said: “The support solutions of the Government are very precious to businesses. However, due to the global influence, the source of imported raw materials from Ford to Vietnam for production was also interrupted, the shopping demand of people dropped sharply with a cautious sentiment.

Previously, Ford Vietnam also planned to assemble the Escape model after 5 years of absence from the market. However, due to the impact of the COVID-19 pandemic, the supply of raw materials is difficult to import, so this model may not be released in time this year at the right "golden time" with registration incentives.

Facilitating businesses to accumulate more capital

According to representatives of Honda Vietnam, the COVID-19 pandemic caused the company's car business results in the fiscal year 2020 to decrease by nearly 8% compared to the previous year. However, thanks to the Government's support policy such as a 50% reduction in registration fees, on July 20, Honda Vietnam returned to assemble and release the CR-V 2020 model after about 3 years of import CBU from Thailand for distribution.

Similarly, Mitsubishi Vietnam has returned to assemble at the factory in Binh Duong and launched its best-selling model, the Xpander, after nearly 2 years of importing from Indonesia for distribution.

This move of businesses shows that they are continuing to expand domestic production while adding more supply of vehicles to meet the increasing demand of customers. In addition, the local assembly will help customers who buy cars save a lot of money from the policy of a 50% reduction in registration fees just issued.

Dr. Le Dang Doanh, former director of the Central Institute for Economic Management, predicted that in the coming time, with the complicated developments of the pandemic, essential aviation industries will face many difficulties. "In particular, people will be cautious, leading to a decline in some items such as clothing, furniture, cars, and electronic equipment, and the real estate market will also affect," said Dr. Le. Post Business Analyst.

Facilitating businesses to accumulate more capital

The head of VAMA policy forecasts that the auto market will have negative growth of at least 15% in 2020. If the pandemic continues, car production and sales in Vietnam may be the lowest in 10 years. come back here.

In order to support enterprises to overcome difficulties, the Ministry of Industry and Trade proposed to soon pass resolutions of the Government on solutions to develop supporting industries. In particular, amending the provisions of the law on special consumption tax (special consumption tax) for domestically produced cars in the direction of giving incentives to the rate of domestic production; VAT in the direction of the early tax refund to create conditions for businesses to accumulate more capital.

According to data from VAMA, in May, the new car market flourished with an increase of 62% compared to April. In June, the total sales of members reached 24,002 vehicles, an increase of 26% compared to May. In the past 7 years, when the government's policy to support 50% of registration fees started to take effect, the sales results of firms have improved somewhat.

Vietnam’s auto market severely affected by Covid-19​

Translated by Vietnam Credit

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