Illustrative image (Photo:haxaco.com.vn)

Hanoi – The Ministry of Industry and Trade supporting the
reduction of automobile registration fees is considered to have a positive
effect on the auto industry in the context of the automobile market facing many
difficulties.

A report by the Ministry of Industry and Trade showed that, in the first four
months of 2023, automobile production decreased by 19.3% compared to the same
period last year. Besides, car inventory in recent years has also been quite
high.

Nguyen Ngoc Thanh, Deputy Director of the Department of Industry under the
Ministry of Industry and Trade, said that many reasons greatly affected the
consumption of automotive products such as difficult access to bank capital,
high interest rates, high exchange rates and inflation, leading to high
inventory of auto products in recent years.

According to the Vietnam Automobile Manufacturers Association (VAMA), domestic
car production sharply declined in the first four months of this year. Car sales
were also on a downward trend. This caused concern among many manufacturing
enterprises. In some localities, there might be a deficit in budget revenue,
and workers have lost their jobs.

Sales of the whole market in April 2023 only reached 22,409 vehicles, including
15,748 passenger cars, 6,487 commercial vehicles and 174 special-purpose
vehicles. All segments had a sharp decrease compared to March 2023 such as
passenger cars down 27%, commercial vehicles down 19% and special-purpose vehicles
down 51%.

The cause of this decline is believed to be the cessation of the registration
tax reduction policy. Many domestic automobile enterprises are also facing
fierce competition for market share.

The above difficulties are most clearly reflected in the business results of
the first three months of the automobile enterprises.

Vietnam Engine and Agricultural Machinery Corporation – JSC (VEA) reported a profit
after tax of nearly 1.37 trillion VND (58.3 million USD) in the first quarter,
down 7% over the same period last year.

VEAM’s profits mainly came from joint ventures and associates such as Honda,
Toyota, and Ford. Meanwhile, selling and administrative expenses were almost
unchanged in the first three months of this year.

Not only manufacturers, automobile distributors also recorded a dismal first
quarter of 2023.

Savico (SVC), a distributor of many brands such as Toyota, Ford, Honda,
Hyundai, Mitsubishi, and Volvo, recorded a profit after tax of only 14.7
billion VND, down nearly 85% compared to the same period in 2022, and decreased
more than 11 times compared to the previous quarter. The amount of inventory of
the enterprise exceeded 2 trillion VND.

Haxaco (HAX), which distributes Mercedes-Benz brand cars, also recorded a
revenue decrease of more than 40%, at less than 1 trillion VND. Profit before
tax was only 5.6 trillion VND in the first quarter, down about 92%.

If the Government continues to apply the policy of reducing registration fee by
50% and bank interest rates returning to attractive levels, electric vehicles
can create a breakthrough for the auto industry. In Vietnam, the auto market is
forecast to prosper again. At the same time, according to SSI Research, auto
stocks will attract cash inflows.

In 2022, along with the strong decline of the VN-Index, the market prices of
many auto stocks decreased from 34% to more than 40%.

Since the decree on reducing registration fees took effect on December 1, 2021,
automobile stocks, especially those of big car distribution giants in Vietnam,
skyrocketed significantly.

Specifically, in the session on December 1, 2021, three stocks of HAX, SVC and
VEA gained to near the ceiling prices.

Notably, SVC shares increased to the ceiling continuously, bringing the market
price from 96,000 VND per share to 126,000 VND per share – the historical peak
price – in the morning session of December 7, 2021.

Investors can have faith in auto stocks if the registration tax reduction
policy takes effect again, said SSI Research.

SSI said it was too early to assess the impact of electric vehicles on the
automobile industry in Vietnam. Car manufacturers have just begun to test
electric vehicle sales to gauge consumer interest. Vietnam still does not have
a strategy to develop charging station infrastructure for electric vehicles.
Moreover, the price of electric vehicles is still high compared to petrol
versions.

On the other hand, despite the sluggishness, some car manufacturers, such as
Toyota, still have plans to increase prices. The reason stems from the risk of
global inflation, exchange rate fluctuations, and increased input costs causing
car prices to be higher than previously./.