Copyright FOURIN, Inc. 2023
Vietnam’s Automobile Market Decreases 10% in 2020 While GDP Growth Stays Positive
Vietnam's automobile market in 2020 is expected to decrease by about 10% from the previous year to around 290,000 units. In Vietnam, restrictions on social activities were imposed nationwide in April 2020 due to the spread of the new coronavirus. However, since the country succeeded in effective control of the spread, production and sales operations were resumed early. The second wave of the COVID-19 hit the country in late July, but some strict local lockdowns, like enforced in the city of Da Nang, prevented the re-spread of the infection until the fall of 2020. As a result, it can be concluded that the automobile market in Vietnam has been less affected by the pandemic compared to the major ASEAN countries.
Regarding the economic situations, the Vietnamese government forecasted the 2020 GDP growth rate to be 2.5% in October 2020. This has become the lowest growth rate for Vietnam ever since 1987, but it is the only country maintaining positive growth among the five ASEAN countries. In August 2020, the EU-Vietnam free trade agreement (EVFTA) came into effect, and the partnership has helped to boost the economic recovery. The Vietnam’s exports from January to September 2020 increased by 4.2% year-on-year to USD 202.8 billion.
Looking at the ratio of domestic and imported cars to the automobile sales volume, the number of imported cars remarkably increased in 2019 due to several factors, such as the tariff elimination on ASEAN-made vehicles (implemented in 2018) and launches of new Thai and Indonesian models. From January to October 2020, the sales volume of domestically produced vehicles decreased by 12%, and that of imported by 26%. In addition, compared to 2019, the ratio of imported vehicles shrank. These sluggish sales may have been a result of the government applying a 50% registration fee reduction measure in June 2020, preferential treatments for domestic cars, and manufacturers in Vietnam increasing production capacities.
The market in 2021 is expected to increase by about 3% year-on-year to around 300,000 units. Although the economy is expected to continue to record net positive growth, the growth rate may remain modest because of the increase in demand due to the registration tax exemption implemented in 2020.