Industry Trend Analysis - Tax And Tariff Cuts Bad For 2017 Sales, Good For 2018 - DEC 2017


BMI View : Weak car demand as consumers hold back from making new purchases ahead of looming tax and tariff cuts in 2018 has lead as to revise down our 2017 passenger car sales forecast to a contraction of 3.7%. We expect growth in car sales to return to positive territory in 2018, driven by the availability of cheaper vehicles as the aforementioned policies come into effect.

We are revising down our forecast for passenger car sales in Vietnam to a contraction of 3.7% in 2017, reaching a total of 15,599 units, having previously expected sales to end the year up 18% ( see ' Robust Car Demand To Support PSA Assembly Plant ' , March 1). This downbeat outlook is due to our expectation that car demand will remain weak over the rest of 2017 as consumers hold back on making new purchases ahead of tax cuts on vehicles with engine sizes of 2.0 litres or less and the elimination of tariffs on completely-built-up units (CBUs) imported from member nations of the Association of Southeast Asian Nations (ASEAN) from January 2018 onwards. This is confirmed by official market data which showed that car sales in Vietnam fell 0.3% y-o-y in the first nine months of 2017.

We expect growth in car sales to return to positive territory in 2018, with forecast growth of 22%, and average annual growth of 27.3% over 2019-2021.We believe that this recovery in domestic demand will be driven by the improved availability of cheaper vehicles as the two policies mentioned above come into effect.

Removal Of Tariffs And Lower Taxes To Fuel Sales Growth In 2018
Vietnam - Passenger Car Sales, Units
f = BMI forecast. Source: VAMA, BMI

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