Will Toyota drop prices to take on imported competition?
Will Toyota drop prices to take on imported competition?
Thousands of completely built-up (CBU) cars imported from the ASEAN and enjoying tariff exemption have arrived to Vietnamese seaports, while domestic automobile manufacturer Toyota Motor Vietnam has just expanded its local factory. Will TMV reduce the price of Toyota vehicles to compete with tax-exempt imports?
A cargo ship carrying thousands of CBU cars imported from Thailand has arrived at Haiphong Port several days ago, carrying Honda, Chevrolet, Ford, and Nissan vehicles, according to dantri.com.vn.
An officer at Haiphong Port told that this cargo ship came from Thailand and could carry around 4,000 vehicles. In late June, another cargo ship from Indonesia will arrive, carrying Toyota vehicles among others.
Thus, after a spell of quiet, tax-exempt imported cars from Thailand are flowing into Vietnam, matching consumers’ “thirst” for cars. Honda dealers sign contracts with customers and agree to handover the cars a few months later. Ford dealers also announced that they have no Rangers in stock, however, higher value orders are fast-tracked as per company policy.
Meanwhile, the Navara model is expected to enable Nissan to sharply increase sales after the Sunny and X-Trail models’ weak performance in the past months. Navara was the best-selling Nissan’s model last year.
All these new arrivals have to pass import testing before they can be marketed.
During the first months of the year, only Honda and General Motors have passed all requirements of Decree 116 to import tax-exempt CBU cars. Four Honda models (CR-V, Civic, Accord, and Jazz) were imported in early March, and started selling on the market half a month later. Meanwhile, GM only imported a batch of Chevrolet Trailblazers.
After successfully importing and discounting its first batch of tax-exempt cars by VND200 million ($8,800) for the first tax-exempted cars, Honda raised prices a short time later. A dealership told VIR that Honda CR-V vehicles went from the already rather high price of VND963 million ($42,500) to VND1.073 billion ($47,300), while the Honda Civic went from VND763 to 903 million ($33,600-40,000). On the other hand, some GM models have been reduced by $1,000-3,000.
The consumer demand seems to exceed the number of tax-exempt cars imported as consumers have been waiting for lower prices. However, it seems difficult to buy a cheap car, despite previous expectations.
In this context, TMV has just announced expanding manufacturing in Vietnam to 90,000 vehicles annually, while they sold only 50,381 semi-knocked down (SKD) cars in 2016 and 41,424 in 2017.
The Japanese auto-maker is considering reducing the number of SKD models assembled in Vietnam to two-three from the five before 2017 and the four in 2017.
TMV's president Toru Kinoshita said that while reducing the number of SKD models in Vietnam, they will increase the quantity of remaining SKD cars and reduce their cost. Additionally, TMV will maintain manufacturing in Vietnam if the annual output reaches 50,000 cars.
As a result, consumers can expect Toyota SKD models to get cheaper in the time to come. Against the thousands, even tens of thousans of tax-exempt cars imported from the ASEAN, reducing the price of SKD models may be an unavoidable policy for Toyota and other domestic automobile manufacturers.
