Benz or Bentley: Vietnam car sales on the rise

A young woman in a tight silver dress posed on the front of a black Audi A6 sedan at a Hanoi auto show, hoping to entice buyers.

Luxury cars are increasingly irresistible for many Vietnamese, say industry players who report rising sales even as daily life becomes harder for the majority struggling to cope with one of the world's highest rates of inflation.

Audi's A6, launched at the Vietnam Auto Expo last month, costs almost $142,000 - which would take the average Vietnamese worker 182 years to earn.

Yet Mercedes-Benz, Lexus, Audi and other high-end brands are increasingly common on the narrow streets of Hanoi, where they vie for space with the motorcycles which are standard transport for most people.

Even more exclusive names including Bentley and Rolls-Royce can be spotted, leading to concerns about growing social inequality.

"We have been doubling our sales every year and I think we'll do the same again," said Laurent Genet, general director of Automotive Asia Ltd, Audi's official importer to Vietnam.

Ford, Toyota, Mercedes-Benz and others have been assembling vehicles in Vietnam for several years.

But only since the country joined the World Trade Organization in 2007 has the market been open to official importers, Genet said, meaning it is still in its infancy and attracting an increasing number of brands.

Auto Motors Vietnam, the official Renault importer, arrived in Vietnam late last year with its Koleos, which retails for 1.429 billion dong ($68,048).

"Sales have started pretty well from the beginning," said managing director Xavier Casin.

France's Citroen returned to Vietnam this year and Range Rover, which has been in the country for three years, says sales are up by about 50 percent in 2011 - even though its models at the Hanoi show retailed for about $200,000.

"Land Rover is very expensive. The market knows that," said sales manager Tran Nhat Tu.

The Vietnam Automobile Manufacturers' Association reported a year-on-year increase of almost 38 percent in car and SUV-style vehicle sales for the first four months of 2011.

- 'For them it's prestige' -

The increase comes despite an economy beset by a high trade deficit, a struggling currency and inflation that has risen every month since last August.

With inflation running at 21 percent in June, ordinary people - whose average monthly salary is 1,365,000 dong ($65) - have been cutting back on expenses.

As part of efforts to stabilise the economy the central bank wants growth in credit to stay below 20 percent this year, with lenders limiting the proportion of loans for "non-productive sectors", notably property and stocks.

But the restrictions have not affected the high-end car market, said Genet.

"In our case we are selling expensive cars for people who don't really need financing," he said. "For them it's prestige. It's almost an investment."

Tran Minh Tuan, 28, is an example. The real estate trader visited the auto show thinking of upgrading from a less-prestigious brand to Audi.

"The car you drive shows your social class, your identity," he said.

"I think the demand for luxury cars in Vietnam has always been high. Although the economy sometimes is not good, there are still a lot of people who have money, who want to change to more expensive cars."

In 1986 communist Vietnam began to turn away from a planned economy to embrace the free market, a policy which led to growth among the fastest in Asia.

Despite recent economic instability the growth has continued, inevitably bringing with it the "conspicuous consumption" evident in Hanoi and Ho Chi Minh City, said John Hendra of the United Nations.

"The wealth gap is rising between the rich and the poor," he said in May before ending his term as UN country director.

But while displays of wealth are sometimes a sign of success, many ordinary Vietnamese doubt the money was acquired honestly, said Matthieu Salomon, international senior adviser for Towards Transparency, the local affiliate of global anti-corruption organisation Transparency International.

Saloman said a survey by his group, due for release in August, found that about a quarter of urban Vietnamese youth believe people are most likely to succeed if they are not following the rules.

Hanoi's Young Business Association recently told a World Bank-backed forum that the "supercars and expensive houses" of a few rich people reflect waste, bureaucracy and corruption in public spending.

For most Vietnamese, a car is still out of reach and the auto show was a chance for people like state employee Nguyen Tuan Hung, 37, to fantasise.

"I drive a motorcycle," he said. "I don't have money to buy a car. But of course, I dream of buying one."

tmh-it/slb