Anxious carmakers hoping losses remain in rear mirror

September 10, 2020 | 09:00

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Despite efforts in converting part of their facilities to produce ventilators and face masks for fighting the coronavirus pandemic, global carmakers are still reporting losses that are hoped to eventually change direction into profit again by the end of the year.

1508p14 anxious carmakers hoping losses remain in rear mirror

Source: Vietnam Automobile Manufacturers’ Association

After several months trying to maintain jobs, luxury car brand Rolls-Royce, which also makes jet engines, announced a pre-tax loss of $7.1 billion for the first half of this year and is to cut nearly a fifth of its global workforce. The move is the biggest reduction in three decades for the group, which sits alongside competitors suffering from low demand in 2020.

Many other giants such as General Motors (GM), Ford, Toyota, GAC, and Tesla have this year partly switched to producing ventilators and protective masks as the pandemic bit into their main portfolios. However, profits have not been forthcoming.

In March, the World Health Organization had called on industry and governments to increase manufacturing of medical products by 40 per cent to meet the rising global demand. At that time, the price of such items surged. Surgical masks saw a six-fold increase, N95 respirators trebled in cost, and gowns doubled. For a time, it was a way to offset losses and keep jobs for labourers in the short term.

GM was one of the groups trying its best to begin manufacturing of surgical masks at its production facilities as well as producing critical care ventilators, but in a July update GM International results “were affected by lower wholesales as a result of the COVID-19 pandemic, partially offset by cost actions.” Among that, GM’s US second-quarter sales declined about 34 per cent on-year.

Elsewhere, Renault in the first six months of 2020 posted a net loss of $8.5 billion and was forced to lay-off nearly 15,000 jobs worldwide in order to survive.

Ford also expects to suffer losses for the year as a whole when in the second quarter it posted 50 per cent revenue reduction to $19.4 billion or $1.9 billion pre-tax loss – ultimately far better than the initial loss prediction of $5 billion noted by global CFO Tim Stone.

Although global vehicle sales remain fragile due to the ongoing outbreak, carmakers are pinning their hopes on recovery in the coming time.

In Vietnam, according to the Vietnam Automobile Manufacturers’ Association (VAMA) sales of the whole market as of the end of July sat at just over 24,000 units, of which 17,600 units were passenger cars, 6,130 units were commercial vehicles, and 340 units were special-purpose vehicles.

VAMA has yet to release sales figures for August, which are hoped not to be as damaging as most facilities have not suffered production halts on a level seen during the social distancing measures being in place in Vietnam in April.

Compared to the same period last year, sales of cars in Vietnam in July decreased only slightly, by about 1,800 units, which was down 10 per cent.

Ford’s production and sales to dealers were better than the group had anticipated in the spring thanks to the government’s supporting package, including a temporary 50 per cent cut in registration fees for locally-assembled cars staring June 26 and lasting until the end of the year, which aims to encourage domestic production.

Thanks to the registration fee cut, carmakers with many domestic and assembled models such as Truong Hai, Thanh Cong, VinFast, Toyota, Peugeot, and Mercedes-Benz are benefiting as customers move from completely-built-up units to localised models.

Toyota Vietnam officially announced total sales volume reaching 5,462 units (including Lexus models) in July. Although this was a fall of 27 per cent on-year, the figure has been increasing over the last four consecutive months.

Last year, Toyota Vietnam achieved outstanding results, as it lined off over 50,000 units. The group’s sales volume last year also ranked first in Vietnam, with a record volume of over 79,000 vehicles.

The company’s bestselling model in 2019, the Vios, continues to rank number one in the market, while completely-knocked-down models like the Innova and Fortuner were consistently on the list of bestselling models last year, according to the company’s website.

Ninh Huu Chan - General Secretary, VAMA

The number of car sales in the first half of the year decreased by 30 per cent on-year, with demand falling sharply as cars became luxury items during the pandemic. Despite a lot of challenges, local automobile manufacturers avoided laying off any employees, as they are usually well skilled and trained and difficult to recruit again. Thus, companies chose to cut salaries by 30 per cent to maintain their workforce until an economic recovery.

Recently, the government provided some policies to encourage domestic automobile manufacturing and assembly, also helping it to develop the supporting industry. For example, cutting 50 per cent of registration taxes for domestic cars and removing the import tax for raw materials, supplies, and components that cannot be domestically produced, have helped tremendously.

The government is also considering to exempt the special consumption tax for locally-manufactured car parts. However, as the calculation of localisation rates is still not clear, the policy’s effectiveness is not as high as expected.

Before the pandemic, the automobile industry projected a growth by 15 per cent on-year. But after being hit by this crisis, it is quite difficult to maintain sales similar to last year, and they could even decrease by another 10-15 per cent in the second half of the year.

Pham Van Dung - Managing director, Ford Vietnam

July’s retail sales maintained a sustainable on-month growth of 13 per cent, with 2,225 vehicles. Despite the turbulences from the pandemic, the strong performance of our leading models like the Ranger, Everest, Explorer, and the Transit has helped push its sales this year to end-July to 10,645.

The mid-size Everest SUV delivered outstanding July retail sales that rose 41 per cent on-month to 620 vehicles, resulting in the leading position in its segment for the month. The Ford Everest offers convenient features to make life easier and includes a highly-advanced safety package and off-road capability for any adventure. The Everest has become a popular SUV for many Vietnamese families.

The Ford Ranger’s sales in July went up by 13 per cent to 1,028 units, keeping the tough truck unbeaten in its segment in Vietnam so far. The Ranger counts for almost 60 per cent of segment share with sales of 5,492 vehicles per year to date.

The US-imported Explorer premium SUV saw its sales this year to end-July jump 14 per cent over-year to 628 vehicles, helping to maintain its top position in its segment. July sales of the Explorer reached 154 units, up 8 per cent on-month. Demand for the Explorer is supported by a strong appeal of its powerful and fuel efficient 2.3L EcoBoost engine, as well as its bold design, top-notch cabin comfort, and cutting-edge driver-assistance technologies.

Standing out for its unique blend of flexibility, fuel efficiency, and smart technologies, the EcoSport compact SUV delivered 286 vehicles in July, pushing its year-to-month sales up to 1,297 vehicles.

Nguyen Van Thu - Customer services, Mercedes An Du

The first outbreak led to a gloomy and plunging consumer market. Our salaries were cut by 20-30 per cent, as the number of sales in this period were equalling just half of the same period last year.

Thanks to some achievements in fighting and preventing the pandemic, the market has been recovering, with sales of the recent months almost reaching the levels of last year. However, every car dealer gets a headache trying to find solutions to boost demand with different tools like reducing prices and offering gifts or maintenance for free.

Since July, when 50 per cent of the registration fee for cars was cut, consumers have been interested in buying cars a lot more. For example, they can save nearly VND250,000 ($5,000) in fees if they purchase a car valued at VND1.9 billion ($82,600). Mercedes-Benz is one of the few luxury brands with numerous models assembled in Vietnam, so people can enjoy this policy.

By Huong Thu

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