The complicated development of the Covid-19 epidemic has caused Vietnam’s automobile industry to struggle as many car companies had to suspend production and close distribution agents. However, economic experts believe that this is only a short-term difficulty.
In the coming time, the automobile industry will break out after the Government revises the tax rate and the EVFTA takes effect.
According to a report of Vietnam Automobile Manufacturers’ Association (VAMA), only 19,154 vehicles were sold in March 2020, which is a decrease of 41% over the same period last year.
In the first quarter of 2020, sales of locally assembled vehicles decreased by 28%, while that of imported cars decreased by 39% compared to the same period of 2019. VAMA representative commented on the cause of the decline in automobile consumption in the first quarter of 2020: "Vietnam's automobile sales in 2020 may drop by more than 15% compared to 2019."
The plummeting sales of cars due to the Covid-19 epidemic have caused many car companies to stop operating and cease production. Specifically, on April 6, VinFast stopped operation of its car factory to prevent and control Covid-19. Not only VinFast, many other auto manufacturers in Vietnam are in the same situation.
Since March 26, Ford Vietnam has temporarily suspended production and assembly activities at its factory in Hai Duong. Honda Vietnam also halted production and assembly of cars and motorbikes until April 15.
In addition to suspending production from March 30 to April 15, Toyota Vietnam also closed all Toyota dealers and branches in Hanoi. Luxury car company Mercedes-Benz has also temporarily suspended its vehicle assembly activities in Vietnam.
VAMA President Toru Kinoshita forecast that if the Covid-19 epidemic is prolonged, the production and sales of cars in Vietnam may decrease to the lowest level in the past 10 years.
Although the auto market in the first quarter of 2020 is gloomy, many economic experts still have positive assessments for this market in the long term. VAMA Secretary Ninh Huu Chan said that the Vietnamese automobile market and industry have made impressive changes.
Therefore, when the Covid-19 epidemic is under control, the automobile industry will continue to grow in both supply and demand. "Currently, the source of spare parts and components prepared at the end 2019 is enough to meet 2020’s demand.
Enterprises are mainly monitoring the epidemic situation and reaction of the market to make operation plans in the coming time." Mr. Chan shared. In the view of the management agency, Director of the Center for Industrial Development Support, Department of Industry (Ministry of Industry and Trade) Do Nam Binh said that the immediate difficulties are just temporary.
The automobile industry will certainly break out in the future because of its potential and strength. In particular, the EVFTA with the roadmap of gradually reducing automobile import tax to 0% will create an opportunity for foreign cars to enter Vietnam market more easily.
"Even if the agreement has not yet entered into force, the expectation about the discount policy of imported cars will affect consumers' demand for cars, from which dealers can increase sales." said Mr. Binh.
In order to support automobile enterprises to overcome the Covid-19 epidemic, the Ministry of Industry and Trade has submitted Official Letter No. 202 / BCT-KH to the Prime Minister to propose to support automobile manufacturers and assemblers to extend the time limit for payment of excise tax, corporate income tax and VAT till the end of the first quarter / 2021; cut down 50% of registration fee for customers who buy domestically manufactured and assembled cars until the end of 2020.
The Ministry of Finance has submitted to the Government for approval of a decree amending import tax rates on components in a gradual manner. If approved, locally assembled vehicles will have the opportunity to reduce prices, which will increase the competitiveness of imported cars.
With the support of the Government and the support that FTAs bring, Vietnam automobile industry will have more development opportunities after Covid-19 is controlled. "The State management agency will consider reducing the import tax on spare parts, because if this tax is reduced, it will help businesses to cut costs and contribute to production development as current domestic production costs are about 20% higher than the region." said Ms. Nguyen Thi Xuan Thuy - Industrial Strategy and Policy Research Institute (Ministry of Industry and Trade).
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