Boston, MA -- (ReleaseWire) -- 02/19/2014 -- According to the Vietnam Automobile Manufacturers Association (VAMA), vehicle sales of its members grew 20.0% in 2013, to 96,688 units. The strong showing in 2013 was largely attributed to the rebound in the automotive sector, which was ravaged by the recession that hit the country in 2012.
We remain bullish on the Vietnamese auto market, however, and forecast vehicle sales to grow 10.0% in 2014. While this is below 2013's growth rate, it is because vehicle sales have normalised and the higher base effects of 2013 will make it harder for them to continue growing at such a rapid clip.
Our bullish outlook on the sector chimes with our Country Risk team's optimistic view on Vietnam's economy. As the government takes steps to privatise the country's state-owned enterprises (SOEs), we see it as a harbinger for more free market reforms in the coming years, which will undoubtedly provide a boost to economic growth (see 'Privatisation Of SOEs Highly Positive For The Economy', January 8). BMI forecasts Vietnam's GDP to grow 5.9% in 2014 and 6.4% in 2015.
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Besides the ongoing privatisation drive, another factor supporting auto sales is our outlook for stable interest rates in 2014. Our Country Risk team forecasts the State Bank of Vietnam's benchmark refinancing rate to remain on hold at 7.00% throughout 2014 (see 'New Credit Growth Target Suggests Monetary Policy To Be Kept On', December 30 2013). The resultant stability in consumer financing rates will continue to make it attractive for buyers to take on financing for their vehicle purchases.
We expect the outperformance of passenger car sales to continue in 2014, aided by the availability of affordable car loans. That said, we forecast commercial vehicle (CV) sales, which were impacted by weak demand from businesses in 2013, to grow 8.0% in 2014, as Vietnam's ongoing banking sector reforms and SOE restructuring begin to bear fruit.
We have also upgraded our 2015 vehicle sales growth forecast from 7.2% to 8.6% due to the gradual abolishment of import tariffs on vehicles imported from other ASEAN countries as part of the region's Trade in Goods Agreement. As duties are slowly reduced, imported cars, which were previously priced out of the local market due to high taxes, will now become more affordable for the average Vietnamese consumer. This will then result in sustained sales growth for the imported car segment.
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