Circular 20 puts the squeeze on car dealers

Laws - Many dealerships are struggling to survive under new rules that restrict the import of both new and secondhand cars.

Some firms now are just trying to sell out their stock and many others are teetering on the verge of bankruptcy.

“In over two months since Circular 20 took effect, we have not been able to import more cars. We are now selling what we have in stock. However, this is not large, some 30 units, and will last maybe one or two months,” said Nguyen Duc Viet, auto import and export manager of car dealership Bao Viet.

“When they are sold out, we may shut down the business,” Viet said.

Circular 20, which came into effect June 26, stipulates that importers of cars with less than nine seats have to show proof that they are authorized dealers for the foreign carmakers. The documents have to be notarized by Vietnamese diplomatic representatives in the country of origin.

Many dealers said they will never be able to get the required documents. Foreign auto companies which have joint ventures in Vietnam will not give any such authorization to importers, they said.

“The situation has never been this bad. Without products to sell, we don’t know how to pay interest on bank loans of over VND3 billion (US$144,000) we used to upgrade our showrooms early this year, not to mention their rents of over $10,000 each month,” Viet said.

Viet said his firm had to scrap its plan to open a 3,000-square meter supermarket of imported cars in Hanoi late this year.

Some small and medium-sized enterprises have even announced they are selling their showrooms to change the business, but it is difficult for them to find customers in the current economic climate.

Vu Quang Tuan, head of the sales department at Thang Loi car dealership, said after the government restricted the import of new cars, many traders planned to switch to trading in used cars. However, this was no longer a viable option now, as the government has raised import taxes on used cars with large engines.