Hanoi (VNS/VNA) - Despite poor results in the firstquarter of 2023, auto stocks are still expected to perform well on supportivepolicies, including interest rate cuts and a 50% reduction in automobileregistration fees.

In the first five months of the year, total automobile sales dropped 36%on-year to 113,527, according to a monthly report from the Vietnam AutomobileManufacturers’ Association (VAMA).

Notably, sales of domestically-assembled cars (CKD) tumbled by 43% over lastyear.

The developments have clearly been reflected in the business results of listedautomobile companies in the first quarter of 2023.

Statistics from VNDirect Securities Corporation showed that the group's revenueand net profit decreased by 14.8% and 11% over last year, respectively.

Saigon General Service Corporation (SVC) posted revenue of over 4.79 trillion VNDin the first quarter, an increase of nearly 14% year-on-year, but profit aftertax dipped 85% to 14.7 billion VND.

The company said that the poor result was due to large supplies whilepurchasing power was weak, leading to a strong rise in the value of inventory.

It also said that a jump in operating expenses and higher interest expensescaused a fall in the company's profits.

Similarly, City Auto Corporation (CTF) and Haxaco (HAX) witnessed significantslumps in profits during the period due to persistently high inflation and weakdemand.

SSI Research forecasts that auto consumption will fall in 2023 due to economicrisks. While electric vehicles promise to make a breakthrough in sales, it isstill too early to assess their impact on the country's automobile industry.

However, the industry is welcoming supportive news as the Government hasdirected the Ministry of Finance to urgently develop a draft decree on a 50%cut in registration fees for cars manufactured and assembled in Vietnam,applied for the second half of 2023.

This is the third 50% cut in the past three years.

Statistics from VAMA showed that after the policy takes effect, the sales ofCKD almost always increase strongly over those of imported cars (CBU). For CKDalone, average sales jump about 30-60% over months without applying theregistration tax reduction policy.

Therefore, the application of the above registration fee reduction policy isexpected to contribute to stimulating consumer demand for domesticallymanufactured and assembled cars and supporting automobile manufacturing andassembling enterprises.

VNDirect expects Haxaco stock to benefit from the policy as most of HAX'smodels are assembled domestically.

Yuanta Securities Vietnam said that the continuous decline in interest ratessince the beginning of the year is another positive for the industry.

The securities firm expects the rates to drop in the third quarter of 2023,when major central banks stop raising rates, supporting customers who purchasecars with loans.

According to a survey by Yuanta, commercial banks have also sharply loweredinterest rates on preferential loans for the first year for customers buyingcars at certain firms.

As Vietnam is one of the automobile markets with the fastest growth rate inAsia, the long-term outlook for auto stocks is positive.

According to statistics from the International Organisation of Motor VehicleManufacturers (OICA), the average growth rate of Vietnam’s auto sales in theperiod 2018-2022 reached 7.5% a year, just below Saudi Arabia's 8.8%.

On the stock market, automotive stocks performed well last month. For example,SVC shares rose more than 12%, CTF climbed 9%, HAX was up 0.61%, and Giai PhongMotor Joint Stock Company (GGG) soared nearly 27.8%./.