Total car sales dropped sharply last month, beating industry expectations about imminent market recovery following satisfactory results in March.

April sales reached nearly 7,000 units, declining 24 percent over March and 46 percent over the same period last year, reported the Vietnam Automobile Manufacturers' Association (VAMA).

Of the number, 2,394 passenger cars and 4,588 trucks were sold, down 26 and 22 percent, respectively, compared to March's levels.

CKD (completely knocked down) sales reached 5,504 units, down 24 percent month-on-month, while CBU (completely built unit) volumes tumbled 23 percent.

Eighteen VAMA members alone last month sold over 6,000 vehicles, declining 20 percent over the previous month and 37 percent over the year.

Almost all carmakers, including Truong Hai, Toyota , Mercedes-Benz, Honda, GM, Ford, Mitshubishi, Isuzu and VMC, witnessed the downtrend. Many were seeing their sales slashed by half and even by more than two-thirds from the figures of the same period last year.

At a VAMA meeting earlier this year, its members predicted total car sales to range between 130,000 and 140,000 vehicles in 2012. Now they expected this year's total sales to reach only about 100,000 units, a decrease of 27.5 percent over last year, the association said.

VAMA Secretary Pham Duy Hung said the automotive industry was in an alerting situation.

"Extremely high inventories are forcing most manufacturers and assemblers to take strong measures to reduce their production," he said. "Dealer networks are facing cash issues and high inventories in particular."

Hung noted that, compared to the same period last year, the industry had seen a slump of about 21,300 vehicles in the first four months of this year.

He attributed the decline to "extremely high" bank lending interest rates of 18-20 percent, tightened lending conditions and "too high" registration fees, which were currently 15-20 percent in Hanoi and HCM City .

"The ‘to be implemented' annual fee set to limit personal vehicle usage is unaffordable to most customers," he said. "This new fee has frozen demand and the market will decline until the fee is cancelled by the Government."

Ford Vietnam General Director Laurent Charpentier told local press that, although the Ministry of Transport has decided not to immediately levy any fees to restrict circulation of personal vehicles, especially personal cars, consumers are still concerned about possible fees they might have to pay if owning a car.

This was one of the major reasons that made the car market sluggish from the beginning of the year, he said.

Economists said the consumer price index edging up only slightly by 0.05 percent last month proved that consumers were tightening expenditure. Families were prioritising essential goods and cars were now among products that many had excluded from their spending lists.

Petrol price hikes and high taxes were making demand for cars reduce even more sharply, they said.

According to a recent survey conducted by online newspaper Dan tri (People's Knowledge) on how some new fees proposed by the Government recently affected buying decisions, 52 percent of those polled said they will not buy a car and 23 percent said they will consider it carefully.

Vietnam Economic Forum's online publication reported that many firms including GM and Ford Vietnam now had their inventories mounting to thousands of vehicles as a result of unsalable cars, and this, together with capital shortages and high interest rates, was causing them utmost difficulties.

Car dealers were continuously offering discounts to cope with the situation, it wrote, with Mercedes-Benz recently having to cut prices for its SUV models by 331 million-959 million VND (15,900-46,100 USD) per unit.

Excluding Toyota , almost all other firms were said to have temporarily extended work schedules, dismissed certain numbers of workers or given employees more days off. Many of the VAMA members' 60,000 labourers were said to be involved in these moves.

Hung said that, with an average passenger car price of 500 million VND (24,000 USD) per unit, the State budget was estimated to have lost a tax revenue of 6 trillion VND (290 million USD) within the first four months of the year.-VNA