Despite dropping revenue in China, Honda remains strong in Vietnam

Despite a huge reduction in revenue in China due to engine errors affecting CR-V and Civic vehicles, Honda is still doing well in Vietnam based on its market shares in the motorbike and car segments, with a new record in car sales.

Frustrating lack of control over price

n the 2018 fiscal year (April 1, 2017-March 31, 2018), the total number of motorbikes sold by the five foreign-invested firms (Honda Vietnam, Yamaha Vietnam, Suzuki Vietnam, Piaggio Vietnam and SYM) reached 3.28 million, including 2.38 million by Honda Vietnam, equaling 72.5 per cent of the total and exceeding the 69.3 per cent in the 2017 fiscal year.

However, despite taking up 70 per cent of the motorbike market, Honda Vietnam has to admit that its Honda Ending Authorised Dealers (HEAD) have been selling its motorbikes above the price set by Honda Vietnam for many years, an issue which is difficult to resolve.

A salesman at the Hadong HEAD branch said that from February to May every year, the demand for motorbikes falls, which in turn reduces prices. However, in the second half of the year the scooter demand increases, which increases prices. For instance, in the last year’s second half, the prices of scooters simultaneously increased by VND4-20 million ($176-881) per vehicle.

With 1.39 million Honda motor scooters sold in the 2018 fiscal year at VND4 million ($176) higher on average, customers paid VND5.56 trillion ($244.9 million) in extra in total to HEADs.

“Honda and HEADs are independent legal entities in partnership with each other. Honda only proposes prices, and has no right to influence HEADs,” said Toshio Kuwahara, general director of Honda Vietnam.

Kuwahara also explained that the reason why customers pay a higher price than the one proposed by Honda is the imbalance between supply and demand, and Honda Vietnam is trying its best to deal with this issue.

Record car sales in Vietnam and dropping revenue in China

During the 2018 fiscal year Honda also sold a total of 12,867 cars in Vietnam, up 5.2 per cent on-year. City vehicles continued to be Honda’s best-sellers.

Despite that, Honda Vietnam could not avoid the Chinese subsidiary’s troubles, which came after the February recall of 350,000 CR-V and Civic cars to check engine errors.

According to tienphong.vn, the issue hugely affected Honda’s sales revenue in March. In China alone, Honda’s revenue reduced by 13 per cent and fell by 2.3 per cent during the year’s first three months.

The number of CR-V vehicles sold in March was 916, far lower than the 14,360 in the same period last year. In addition, the sales revenue from Civic vehicles also fell by 16.5 per cent.

Honda denies possibility of similar errors in Vietnam and China

To clarify Honda’s recall decision, Kuwahara said: “The cars in China did not fit the weather conditions in some Chinese localities.”

Addressing Vietnamese customers worrying that their CR-V and Civic cars have the same errors as vehicles in China, Kuwahara said in the afternoon of May 24 that Honda adjusted the technical specifications of CR-V and Civic vehicles to better match the export markets’ weather conditions. Therefore, Vietnamese car owners do not need to worry about the same errors.

Source:VIR