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Vietnam’s car market has been growing at the fastest rate in Southeast Asia, boosted by the rapid growth of middle-income earners yearning for a status symbol, according to marketing and consulting firm Solidiance.
Although sales in the country still lag behind neighboring countries, the market grew faster than other regional peers, at an annual growth rate of 36 percent last year, the company said in a report released last week.
That compared to 5 percent in Indonesia while sales in Malaysia, where car density is more than 20 times that of Vietnam, dropped 13 percent. In Thailand car sales also fell 4 percent last year.
The report forecasts that the car market in Vietnam will remain strong in the next four years although growth will slow down to 13 percent a year, on average, through 2020.
It attributed the surging demand in Vietnam to strong economic growth of above 6 percent and tariff cuts.
Vietnam has one of the region's fasting growing middle-income groups, defined by an average income of above $1,000 per month. The national average for the whole year is $2,200, according to official statistics.
The middle class, which has been growing 15 percent annually, is shifting from motorbikes to cars, not just as a means of convenient transport, but also as an important status symbol, the report said.
Vietnam’s largest and wealthiest cities, Hanoi and Ho Chi Minh City, account for 45 percent of all 1.1 million passenger vehicles registered in the country.
Markets for luxury passenger vehicles in Vietnam, such as Mercedes, are one of the world’s fastest growing markets among the affluent Vietnamese income group, the report said.
Yet it said the market is also challenged by increasing consumption taxes, which could be meant to generate revenue as well as to reduce pollution and congestion, given underdeveloped infrastructure.
Hanoi and Ho Chi Minh City are both seeking solutions to crippling congestion problems. Debates have been going on for years as blame is passed between cars and motorbikes.
Both crowded cities are trying to modernize their public transport systems with metro lines and river buses, but time and money remain tough challenges.
