BusinessLao Economy

Dealers Eye Slump In Vehicle Sales

Car dealers are anticipating a significant downturn in sales volumes as the Lao economy starts to slow and purchasing power declines.

To counteract the drop in sales showrooms are stepping up efforts to attract customers through various special offers.

Kolao, who deal in Kia and Hyundai models, the Maningnom Group which sells the Chevrolet brand, and Lao Ford City which sells Ford models are all offering zero interest rate loans in a bid to halt the drop in sales.

Zero interest loans run from one to three years, while some dealers offer a fixed interest rate loan below the normal rate of 0.75 percent for customers wanting to pay in installments for periods up to five years.

Dealers said sales had plummeted recently after they had enjoyed brisk business in the past few years, adding that the economic slowdown and delays in the implementation of several mega investment projects was responsible for the fall in sales.

Meanwhile the large influx of vehicles into the country is forcing dealers to introduce promotions to attract customers. Many dealers have increased the number of advertisements they run in newspapers, television and radio, with a focus on the quality and fuel economy of the vehicles they sell.

“Most dealers made incorrect sales forecasts,” Maningom President Mr Souksamone Sihathep told Vientiane Times last week.

He said several dealers agreed with him that they were struggling to maintain sales this year, noting that sales had skyrocketed in recent years due to a surge in demand and purchasing power.

Prices saw a huge increase in 2012 when the supply of vehicles fell below demand. In 2011 and 2012, some customers had to place orders six months in advance to get the model they wanted. The cost of a two-wheel drive Toyota Vigo Champ for example jumped from US$34,000 to US$40,000 over this period. Today, however, a two-wheel drive Toyota Vigo Champ sells for US$34,000.

“I think vehicle sales have dropped by about 30 percent compared to previous years,” Mr Souksamone said.

Many dealers said the government is now forcing them to pay the full amount of vehicle tax after it was learnt that some dealers were declaring the sale price to be lower than the actual amount charged. This is one of many examples of revenue loss suffered by the government.

When the government strictly enforces vehicle tax, importers are required to pay more tax, which in turn drives up the price of vehicles on sale.

However, dealers have delayed putting up vehicle prices in the showroom because of the drop in demand, saying it’s not good business sense to raise prices at a time when customers have lower purchasing power.

The number of vehicles in Laos has now have reached more than one million since the government authorised dealers to allow customers to pay for their purchases in installments.

Source: Vientiane Times