New vehicle sales in Vietnam fell 7% to 22,870 in July 2023 from 24,461 units a year earlier, according to wholesale data from the Vietnam Automotive Manufacturers Association (VAMA).

The market this year has failed to build on last year’s post pandemic rebound despite the long awaited return of international tourism with higher interest rates holding back consumer spending and investment. GDP growth slowed to 3.7% in the first half of the year compared with growth of 8% in the whole of 2022.

The central bank reversed some of last year’s interest rate hikes, to 4.5% from a peak of 6% earlier in the year, to help stimulate domestic growth. The finance ministry also halved vehicle registration tax at the beginning of July until the end of the year to help support domestic vehicle manufacturers which are also offering discounts to stimulate sales.

Vehicle sales in the first seven months of 2023 fell 31% to 145,496 units from 209,927 in the same period of last year, with deliveries of passenger vehicles plunging 35% to 109,489 units while commercial vehicle volume was down 15% at 36,007 units. The data did not include sales of key brands Mercedes-Benz, Hyundai, Tesla and VinFast which together accounted for an estimated 23% of total vehicle sales last year.

Truong Hai (Thaco) group, the local assembler and distributor of Kia, Mazda, Peugeot and BMW Mini and a major player in the commercial vehicle segment, reported a 40% plunge to 50,035 units year to date. This included a 47% drop in Kia sales to 20,811 units; a 20% fall in Mazda sales to 17,224 units; and an 81% plunge in Peugeot sales to 1,423 units; while Thaco truck sales were down 35% at 8,785 units.

Toyota sales fell 37% to 30,450 vehicles YTD benefiting Ford which reported an 82% surge to 20,573 units thanks mainly to strong demand for its locally made Ranger pickup truck while Mitsubishi sales fell 27% to 16,365 units; Honda 11,085 units (-49%); and Suzuki 9,051 units (-11%).

Separate reports suggested Hyundai sold 27,627 vehicles in the first six months of 2023, making it the country’s leading vehicle brand just ahead of Toyota, while Vinfast sold 11,638 units.

A number of foreign brands recently announced plans to enter Vietnam’s electric vehicle market which will inevitably put further pressure on VinFast as well as established foreign brands. BYD said it planned to build an EV plant in the country while Hyundai launched the Ioniq 5 in May and Mercedes-Benz said it would introduce three EVs this year.

The finance ministry is considering providing an additional US$1,000 EV purchase incentive in addition to existing concessions, as part of a package to attract EV production to the country which would also include reducing import taxes on EV components and charging stations.