Car dealers warned of bad business performance in second half of year

TMT JSC reported modest revenue of VND1.244 trillion and post-tax profit of VND3 billion for the first half of the year, a sharp fall of 94 percent against the same period last year. To date, it has fulfilled 25.5 percent of the yearly plan in revenue and 2.4 percent of profit.

Truong Long Engineering & Auto JSC (HTL) made a small profit of VND5.2 billion in the first two quarters, just equal to 1/8 of that in the same period last year. Its revenue has fallen by more than half to VND335 billion.

Hoang Huy Investment & Service (HHS), a subsidiary of Hoang Huy Group, reported profit of VND32 billion in the first half, but the figure is just 20 percent of the profit it planned for this year.

TMT, HTL and HHS all made big profits in 2014 and 2015 when the demand for Chinese trucks soared as a result of the preferential import tariff on trucks and the Ministry of Transport’s policy on tightening control over the tonnage of trucks in circulation.

As firms were threatened with heavy fines if the tonnage was higher than the permitted levels, they had to purchase new trucks for cargo transport.

HHS is the exclusive distributor of China’s DongFeng trucks, while TMT assembles and trades Sinotruck. HTL is the biggest sale agent of Hinotruck in Vietnam.

Poor sales have been blamed on market saturation. MOF in late 2015 decided to raise the import tariff on truck models instead of the preferential tariff as applied before. All these have made Chinese trucks less attractive.

The changes in policies explained why the business performance of vehicle distributors, including City Auto, Hang Xanh Auto and Phu Tai, slid in the first half of the year.

HAX has just fulfilled 20 percent of the yearly plan on profit, and CTF 13 percent, while SVC and PTB have reached 37 and 35 percent, respectively.

The decrease in the return on sales ratio shows that distributors have had to slash prices sharply to clear stocks due to low demand, since car buyers waiting until the import tariff is cut from 30 percent to zero percent in 2018.

VDSC warned that difficulties would still exist in the second half. In July, VAMA’s members sold 20,662 cars, down by 15 percent compared with June.