In December of 2023, Italian high-end car maker Lamborghini opened a showroom in Vietnam’s Ho Chi Minh City. This saw the luxury car brand join the likes of Porsche and McLaren which had both entered the Vietnam marketplace just a year or two earlier.
Indeed, these well-known sports car makers appeared to have identified an opportunity in Vietnam in the wake of some of the most rapid economic growth the region had ever seen. That said, with an average wage in the burgeoning Southeast Asian nation of less than US$4,000 a year, and a Lamborghini retailing for around half a million dollars, these vehicles were clearly targeted at only a very select few.
There has, however, for everyone else, been a range of more affordable brands in Vietnam available for years now–Kia, Ford, and Toyota to name just a few. Furthermore, these brands have been a significant part of a motor vehicle market that has been expanding in leaps and bounds. Notably, vehicle sales among data-contributing members of the Vietnam Automobile Manufacturers’ Association–the VAMA–jumped from a little less than 134,000 in 2014 to just over 358,000 sold in 2022.
But this rapid growth, over the last year or so, has started showing signs of impermanence.
Notably, last year, on the back of broader economic challenges, the number of vehicles sold began to decline hitting just over 276,000, about 29.6 percent less than in 2022. This has also continued into 2024, with motor vehicle sales down at the end of July by about 3 percent. It is also in stark contrast to Vietnam’s supply which has conversely been on the rise.
By the end of July, Vietnam had imported more than 91,600 units, 14.8 percent more than it had by the same time last year.
This looks, at least in part, to have been driven by the EU and US antidumping duties on Chinese electric vehicles with China’s electric car makers looking for buyers south of the border instead. Notably, vehicles imported from China into Vietnam nearly tripled in the year to July 31.
That said, it’s not clear that this will significantly impact local car sales.
TMT Motors, which assembles and distributes Chinese Wuling Mini EVs, reported sales just shy of 600 cars last year after originally setting a target of 5,000. This year it has lowered the bar forecasting sales of just 1,000 units.
Furthermore, Vietnam’s own electric car maker VinFast, which had originally been targeting the EU and North American markets, now looks to have reorientated itself to building a customer base at home. With a factory in Hai Phong reportedly capable of producing 250,000 vehicles a year the potential for the EV market in Vietnam to become oversaturated very quickly is very high.
But more to the point, Chinese imports have only accounted for a fraction of the vehicles imported into Vietnam so far this year–roughly 19 percent. It’s Indonesia and Thailand, with 41.15 and 35.7 percent, respectively that dominate Vietnam’s motor vehicle imports.
Indonesia, in particular, has seen a surge this year of about 29 percent. Vehicles arriving from the archipelago are also much cheaper than from other parts of the world. Imported vehicles from China, for example, have an average value of about US$30,000, whereas from Indonesia they average just US$14,651. Imports from Thailand–which have actually fallen by about 9.34 percent this year, though it still holds second place–are also cheaper averaging US$19,214 per unit. This has seen the overall average value of an imported motor vehicle fall from US$23,400 in July last year to US$20,600 in July this year.
Of note, imports from Indonesia and Thailand enter Vietnam tariff free under commitments made under the ASEAN Trade in Goods Agreement. From China, the import tariffs on motor vehicles can be anywhere from 47 to 70 percent.
This influx of cheaper imported cars, and the challenges it might present to local car manufacturers, has not gone unnoticed either.
Since the pandemic, an on-again, off-again policy whereby vehicles assembled in Vietnam can be registered at half price has been in play. Most recently, it was reported that this policy would be on-again at least for the next three months.
That said, the EU has raised concerns that this could put Vietnam in breach of World Trade Organisation norms and the European Union-Vietnam Free Trade Agreement and therefore it’s not clear how long this might practically last.
Regardless, it is a sign that there is some concern for local car makers in the upper echelons of Vietnam’s establishment and indicative of a willingness of key decision makers to go against Vietnam’s free trade agreement commitments.
All of this is to say that Vietnam’s car market looks to be deep in a state of flux and it’s far from clear as to when or how it might end nor what the local car market might look like afterward.
With this in mind, foreign car makers doing business, or looking to do business in Vietnam, should make sure to keep up with the latest developments in Vietnam’s automotive industry by subscribing to the-shiv.