Vietnam ’s vehicle sales suffered a 1 percent drop last year and a dramatic 12 percent fall in December, the Vietnam Automobile Manufacturing Association (VAMA) said on Jan. 10, as the auto sector heads into a difficult year.

Slightly more than 110,000 vehicles were sold last year. The association, whose members' sales accounted for the lion's share on the market, said December sales were down 12 percent year-on-year to 10,937 units.

VAMA attributed the fall to economic difficulties, high lending interest rates, and a State policy to tighten the purse string of all State agencies.

On the other hand, the shorter supply of auto components resulting from the Japanese tsunami and Thai flooding are also blamed for the fall in overall sales.

While commercial vehicles and SUV/MPV/Cross-over units saw a 15 percent and 6 percent decline at 46,000 units and 23,000 units respectively, passenger cars saw a 22.1 percent jump at 40, 858 units.

Despite the stumble in sales last year, the "big three" are enjoying better sales than 2010.

Vietnamese car maker Truong Hai led the country's sales last year among the 17 manufacturers in Vietnam , selling 31,801 cars, up 28.7 percent from 2010, VAMA said.

Truong Hai assembles vehicles including the Republic of Korea ’s Kia brand and buses.

Japanese Toyota ranked second, with 29,792 cars, up 26.9 percent from 2010.

Meanwhile, US GM Deawoo sold 10,350 units, up 9.3 percent year-on-year.

No prediction for 2012 sales has been made by the local industry.

However, according to a latest research report, "Vietnam Automobile Forecast 2014" despite the recent economic crisis, sales of passenger cars and MPVs in Vietnam are anticipated to post a CAGR (Compound Annual Growth Rate) of more than 5 percent and 4 percent, respectively during 2011-14.

The research was made by Global Information Inc, a Japan-based information and research service company.

The research concluded that Vietnam 's automobile industry has faced an increase in consolidation among domestic as well as international players, while the industry players are adopting various strategies such as forward or backward integration with other industry players to sustain their position and increase their market capacity.

Passenger cars will continue to dominate overall market sales by the end of the forecast period, owing to the relatively low-penetration rate of this segment in the country, it said.

According to the Ministry of Industry and Trade, the national automobike industry boasted 397 businesses, of which, 12.8 percent specialised in assembly, 10 percent in production of frameworks, bodies and carriages, 52.7 percent in parts and accessories and 24.4 percent in maintenance.

Viet Nam will open the car market completely in 2018 under free trade agreements, a deadline by which local manufactures need to improve their competitiveness.

Taxes on passenger cars of less than nine seats and components imported from Southeast Asian countries will be completely removed in 2018.

Since the Vietnamese auto industry came into being in 1991 with the licensing of the first two joint ventures, Mekong and VMC, it has benefited from many preferential policies.

However, analysts say local manufactures have not made full use of these policies to develop a strong industry and the industry still has to import most of the components it needs. /.