Vietnam’s automotive industry surges in Q1/2025: Boosted by tax and fee reductions

The credit profile of the Vietnamese auto industry has improved significantly in Q1/2025 thanks to government support policies and recovering consumer sentiment.

A recent report by VIS Rating said that auto sales were positive thanks to a sharp increase in electric cars, while the supply of domestically produced and imported cars increased. Most of the 14 listed auto companies showed improvements in profitability and debt repayment capacity. The issuance of auto bonds increased as access to capital expanded.

VIS Rating expects that demand for auto purchases will continue to be high, thereby ensuring the absorption of increased supply. Large-scale businesses in the industry - with nationwide distribution networks and diverse product portfolios - will easily take advantage of market demand and have positive sales in the next 12 months.

Tax policy boosts sales

As VIS Rating has reported, tax and fee incentives implemented in the first quarter will boost domestic production and demand for automobiles. Accordingly: Decree 21/2025/ND-CP (effective from February 10, 2025) extends the preferential import tax of 0% for auto components for domestic assembly, supporting cost competitiveness for domestic manufacturers such as Vinfast, Thaco and Geleximco, provided that they meet specific criteria on quantity and quality.

Decree 51/2025/ND-CP (effective from 01/03/2025) extends the exemption of registration fees for all electric vehicles (EVs) until 2027. Decree 73/2025/ND-CP (effective from 31/03/2025) reduces taxes by 10-15% on imported vehicles from countries without direct trade agreements, including the United States, bringing down the retail price of cars.

Also in Q1/2025, car sales recovered thanks to improved consumer sentiment and high supply. Accordingly, car sales in Q1/2025 reached 105,000 vehicles (+60% yoy), thanks to a sharp increase in Vinfast electric car sales (+295% yoy). Consumer sentiment continued to improve, supported by more reasonable price levels and expanded road infrastructure.

Supply increased sharply, with domestically assembled vehicle production increasing 35% yoy and imported vehicles increasing 44% yoy.

Key domestic auto manufacturers, including Tasco (BBB+ stable), Geleximco and Vinfast, have announced plans to expand production and assembly capacity in 2025.

Auto industry driven by bank loans

According to VIS Rating, outstanding loans of listed companies, mainly auto retailers, increased by 30% yoy in 1Q25 (compared to 36% yoy in 1Q24), indicating a sharp increase in demand for bank loans to stock up on inventory in anticipation of increased demand.

Bond issuance activities also increased with new bond issuances from Tasco and Thaco in 1Q25, mainly to restructure debt and supplement working capital.

VIS Rating's assessment shows that in 2025, VND8,000 billion of bonds will mature, down from 2024, all of which are VinFast bonds. VinFast plans to issue an additional VND5,000 billion of bonds in the second half of 2025, guaranteed by Vingroup.

In Q1/2025, VinFast reported revenue growth of 150% year-on-year thanks to stronger sales, and EBITDA remained negative at -9.8 trillion VND (Q1/2024: VND8,500 billion). Outstanding loans decreased by 18% year-on-year to VND66,000 billion, and VIS Rating experts assessed that the company's debt repayment capacity is mainly supported by its ability to access new capital sources from Vingroup's ecosystem.

Strong sales revenue and cash flow improve debt coverage ratio

Listed auto companies’ revenue grew 29% yoy in 1Q25, with EBITDA up 23% yoy. Companies targeted 23% revenue growth for 2025, achieving 16% of that target in 1Q.

Cash flow from operations (CFO) soared 216% yoy, supported by higher sales revenue. Inventory turnover increased from 7.63x to 9.48x in the same period.

Leverage ratios improve, as Debt/EBITDA falls to 6.05x in 1Q25 (from 6.2x in 1Q24), driven by 33% YoY EBITDA growth outpacing debt accumulation.

Large-scale listed companies (e.g. HUT, SVC, CTF) with revenue above VND5,000 billion have stronger credit profiles, thanks to a diversified portfolio of distributed automobile brands (an average of 6-7 brands) and extensive distribution networks.

Smaller units (e.g. TMT, HTL) record weaker sales, resulting in significantly lower inventory turnover ratios. Many of these companies rely on new debt to finance working capital shortfalls.

(Acccording to Markettimes)

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