Reduced registration fees, business results of enterprises are still not positive

Vietnam has reduced registration fees for domestically produced and assembled cars three times. Photo: TC.

People rush to buy cars when fees are reduced

To contribute to stimulating consumption, providing financial support to people and businesses, and creating momentum to restore growth for the domestic automobile manufacturing and assembly industry, since 2020, Vietnam has reduced registration fees (RTF) three times and recently the Ministry of Finance continued to propose reducing the RTF collection rate by 50% for the fourth time.

Car sales have fluctuated over the years. Chart: Huyen Mai.

However, in the 3 years of applying the reduced LPTB collection rate, there were 2 years when sales of car brands under the Vietnam Automobile Manufacturers Association (VAMA) decreased: In 2020, it decreased by 8% compared to 2019 and in 2023, it reached 301,898 vehicles, equivalent to a decrease of 25% compared to 2022.

People only focused on buying cars during the period of applying the LPTB reduction policy. The number of registered cars in the last 6 months of 2020 (the period of applying the LPTB reduction) reached 209,584 cars, accounting for 70.6% of the total number of cars sold in 2020.

In 2021-2022, the reduction in LPTB will be applied from December 2021 to May 2022. In December 2021, the number of cars registered before registration: 63,743 cars. In the first 5 months of 2022, the number of cars registered before registration: 168,450 cars. Meanwhile, in 2021 (11 months without applying the policy), the total number of cars sold was 304,149 cars, and in 2022 it was 404,635 cars.

In 2023, after 6 months of reducing registration fees, the number of domestically registered vehicles reached 176,483, accounting for 58%.

The chart shows car sales in 3 stages of LPTB reduction. Chart: Huyen Mai.

3 times of registration fee reduction, many businesses do not "enjoy" the benefits

2020 was the first year our country was affected by the COVID-19 pandemic. Revenue and profits of business units and car dealers were recorded quite gloomy in the first two quarters of the year. But in the second half of the year, when the policy of reducing registration fees was issued, car sales skyrocketed.

Some businesses have found a "bright door" in the midst of difficulties, such as Hang Xanh Auto Service Joint Stock Company (Haxaco, Code: HAX) - the Mercedes car distributor with the largest market share in the country.

For the whole year of 2020, Haxaco recorded approximately VND 5,570 billion in net revenue from sales and service provision, an increase of 8% compared to 2019 and VND 125.3 billion in profit after tax, an increase of 2.5 times.

Explaining the historic profit peak, Haxaco's leaders said that the company took full advantage of the opportunity when the Government issued a decree reducing registration fees by 50% for domestically assembled cars. Therefore, all four Haxaco dealers exceeded their sales targets, ranking among the top dealers in Mercedes-Benz car sales in the Vietnamese market.

In addition to Haxaco, another big player in the industry is Saigon General Services Corporation (Savico, Code: SVC) - a distributor of brands such as Toyota, Ford, Hyundai, Chevrolet, Volvo, Fuso, Mitsubishi, Honda, Suzuki... also had a successful business in the fourth quarter of 2020.

However, Savico's accumulated net sales and service revenue for the whole year of 2020 decreased by 11.9% compared to the previous year, reaching 16,083 billion VND. Profit after tax was only over 224.8 billion VND, down 3.6%.

Even worse than Savico, large enterprises such as Vietnam Engine and Agricultural Machinery Corporation - JSC (VEAM, Code: VEA) also fell into crisis with declining sales, sales revenue and profits all falling sharply compared to previous years.

In 2020, VEAM achieved about VND 3,667 billion in net revenue from sales and services, 18% lower than the previous year. Profit after tax reached VND 5,594 billion, down more than VND 1,700 billion.

The most struggling company in the group at that time was City Auto JSC (Code: CTF) - the largest Ford car distributor of Ford Vietnam. This company achieved 5,644 billion in net revenue from sales and services, down 11% compared to 2019. Profit after tax was only 1.4 billion VND.

In 2021 alone, despite not receiving support from this policy (the LPTB reduction policy will not be applied until December 2021), car sales still increased sharply. A series of companies reported profits.

Accumulated for the whole year of 2021, Haxaco achieved net sales and service revenue of VND 5,552 billion, after-tax profit reached VND 160 billion, up 28%.

As for Savico , net sales revenue and service provision for the whole year of 2021 reached 14,188 billion VND, down 11.7% compared to 2020, profit after tax reached 211 billion VND.

For CTF , net revenue from sales and service provision reached 4,509 billion VND. After deducting expenses, this company reported a profit after tax of approximately 52 billion VND.

By 2022, the LPTB reduction policy will be applied for the first 5 months of the year. Car sales in the first months of the year also recorded an increase, and business results of enterprises grew impressively.

Savico 's net sales and service revenue reached a record of nearly VND 21,310 billion, up 50% compared to 2021. Net profit reached VND 586 billion.

Haxaco recorded net sales and service revenue of more than VND 6,775 billion, up 22% compared to 2021 and 31% higher than the level before the COVID-19 pandemic. The unit's net profit grew by 50% compared to the previous year, reaching more than VND 239.7 billion.

Meanwhile, CTF escaped the trend of consecutive revenue decline in the period from 2018-2021, with accumulated revenue in 2022 reaching nearly 6,307 billion VND. CTF's profit after tax reached 117 billion VND.

VEAM also recorded an 18% increase in net revenue, reaching VND4,747 billion. The unit earned a net profit of more than VND7,600 billion, an increase of 32%.

After 1 year of not applying the policy of reducing the LPTB collection rate, this policy will return in June 2023. But this time, the number of cars sold by VAMA businesses in 2023 decreased sharply, causing car dealers to also record plummeting revenue and profits.

For the whole year of 2023, Savico recorded net revenue of more than VND 20,836 billion, down nearly 2% compared to 2022, profit after tax reached only more than VND 44 billion, down 92.4%.

Not only Savico, Haxaco only recorded more than 3,981 billion VND in net revenue from sales and service provision and a net profit of only 37 billion VND, down 41% and more than 84% respectively compared to the previous year.

CTF recorded a 13% increase in net sales and service revenue over the same period, reaching VND7,100 billion. Meanwhile, the company's net profit for the year decreased by 61%, reaching only VND44 billion.

VEAM's pre-tax profit in 2023 reached VND 6,265 billion, but this was due to recording VND 1,205 billion in financial revenue, along with VND 6,845 billion in dividends and profits shared from associated companies (mainly from Honda Vietnam, Toyota Vietnam and Ford Vietnam).

2023 is considered a year of economic recession, tight credit, high interest rates, making it difficult for many people to access loans from banks.

As a result, despite the application of a registration fee reduction policy at the end of the year, sales of assembled cars in 2023 still decreased by 25% compared to the same period last year.

In addition to the reasons of conflicting with the Prime Minister's roadmap to commit to achieving net zero emissions and violating basic principles of the WTO, the reduction of LPTB also needs to be carefully considered in terms of economic efficiency.

The 3 times of registration fee reduction are at the following times:

1st time: Decree No. 70/2020, effective from June 28 - December 31, 2020.

2nd time: Decree No. 103/2022, effective from December 1, 2021 - May 31, 2022.

3rd time: Decree No. 41/2023, effective from July 1 - December 31, 2023.

Source: https://laodong.vn/kinh-doanh/giam-le-phi-truoc-ba-ket-qua-kinh-doanh-cua-doanh-nghiep-van-chua-kha-quan-1363274.ldo