Pay packets to drive car ownership growth

The Institute for Industry Policy and Strategy has just submitted the auto industry development planning scheme to 2020 with a vision towards 2030 to the Ministry of Industry and Trade’s appraising council and their document reveals local consumers are developing a preference for cars.

Lifestyle monitor TNS Vietcycle 2009 survey showed 45 per cent of Vietnamese families had incomes ranging from VND4.5 million to VND20 million ($215–$950) per month. And more money means car purchases, particularly among young people.

Despite its 86.7 million population and rather modest per capita incomes averaging $1,150 in 2010, the World Bank still pegged Vietnam as a big consumer in the ASEAN bloc.

Vietnam’s current car coverage rate of 18.7 units/1,000 residents based on purchasing power parity (PPP) average per capita income of around $2,785 in 2010 is reportedly much lower than the average in countries with similar development levels as Vietnam.

Experts engaged in drafting the above-said auto industry development planning scheme forecast car ownership rate in Vietnam would grow to 26 cars per 1,000 residents by 2015, before increasing to 40 cars in 2020 and around 60 cars per 1,000 residents by 2025.

Experts also said high prices could remain a major block impeding personal car market growth in Vietnam. The country has an extremely high excise tax though the country could finalise its car import tariff cut and reduction programme within ASEAN free trade area in 2018.  

“The situation is exaggerated by the various fees in existence such as registration, plate provision fees or road toll fees which are all on the rise in Vietnam parallel to the government’s commitment to putting restrictions on personal means of transport, [and] particularly personal cars,” the scheme said.

According to global growth consulting company Frost & Sullivan forecast, ASEAN’s auto market size by 2018 would be around 3.962 million car units with 10–12 per cent of this coming from Vietnam at approximately 400,000–500,000 car units. Of the Vietnam figure, sedan lines will account for 28 per cent, multi-purpose vehicles and double chassis cars will make up 25 per cent, and passenger cars around 40 per cent. The remainder will be other car types.

Vietnam-based designed auto assembly and manufacture capacity is 431,000 units per year. However, the industry reports says less than 200,000 car units are made a year. Therefore, the report proposes temporarily halting granting investment certificates to auto assembly projects until 2015 except in the case of strategic car lines.