Car sales in Vietnam up despite high prices, long waits

Vietnam's auto sales continue to climb despite rising prices and three-month waiting lists, according to industry insiders, as consumer preferences change with the speed of economic reform.

According to the Vietnam Automobile Manufacturers Association (VAMA), members sold more than 28,524 units in the first half of 2007, up 79 per cent year-on-year.

At the same time, waiting lists on certain models have been extended in a market where cars are ordered by showrooms only after consumers have committed to making a purchase.

"Customers have to leave a VND10-15 million (US$625-$938) deposit when they order a car, depending on the type," said Cao Hong Quang, a salesman at a Toyota showroom in Hanoi. "And then they have to wait between a week to 3-4 months before the car can be delivered." This has not discouraged buyers.

The VAMA attributes rising demand in the market to a change in consumer preferences. A couple of years ago, the few consumers who could afford a car would wait until the Government reduced import or luxury taxes before buying.

Now, many expect officials will maintain taxes at current levels for the foreseeable future - as a result cars are being snapped up by the country's growing middle class, says the association.

The trend has also been helped along by economic growth, particularly in the stock market which expanded by 145 per cent last year.

The secondhand market has also seen a similar trend, but faces the added issue of rising prices backed by strong demand.

Nguyen Dai Tam, owner of a secondhand showroom in the capital, estimates that prices on used cars have increased by around 5-10 per cent.

The Mitsubishi Jolie and Kia Morning SLX, for example, were $18,000 and $16,000 respectively in 2006, and now go for around $19,000 and $17,000, said Tam.

The price hike is partially attributed to short supply of certain popular models like the Jolie, but primarily to the affordability of used cars in the market.

"We are looking for a secondhand 2003 Toyota Altis because my husband likes the $25,000 price tag [he saw earlier this year]," said Cao Minh Trang, an actress working at the Thang Long Water Puppet Theatre.

"However, it seems prices have increased now that weve decided to buy."

The price of a used car, though, is still more attractive than purchasing a new vehicle, she said.

Executives predict that showrooms for new and secondhand vehicles will continue attracting customers for the rest of the year.

"The domestic auto market will only grow hotter throughout the year due to rising demand from individual consumers and companies," says Honda sales department manager, Tran Le Hiep.