Despite the year-on-year increase, the figure still fell short of the previous month by 1,000 units.

Experts said the increase was due to high demand before Tet combined with an automobile import tax cut that took affect at the start of the year. However, Vietnam's General Department of Customs has announced new car tax rates, effective from January 29, that will see an increase of between 1 and 6 percent.

The minimum tariff to be applied by customs will generally increase from 500 USD to 1,500 USD against last year. Some automobiles, such as the five-seater Toyota Corolla, will be subject to a new tariff of 11,000 USD replacing for current tariff at 9,500 USD.

Most experts and traders are still optimistic about the market recovery in 2011 after the sharp dip in 2010.

Director of the Truong Hai Automobile Joint Stock Company Tran Ba Duong said that they had invested strongly to widen their business. His company planned to leave the difficulties of 2010 behind to sell 32,000 automobile in 2011. Last year, he added, his company sold 26,500 units.

A representative from Audi Vietnam said demand in Vietnam was increasing, shown by the number of orders his company had recently received. In January, they had received three times as many orders compared with the same period last year, he said.

In 2010, the automobile market was strongly affected by the global recession.

A report by the Vietnam Automobile Manufacturers' Association said that last year, 150,000 units were sold in the country, a year-on-year decrease of 17 percent.

Experts said that the reasons for the dip were tax policies, exchange rate fluctuating and high interest.

Due to these challenge, some experts are worried that the market might not recover. The marketing director of a famous automobile company in Vietnam predicted that the market this year would not change much compared with 2010, based on the fact that many importers and manufacturers had increased prices due to the devaluation of the Vietnamese dong.

The Ministry of Finance has also recently asked the Government to increase registration tax from 15 to 20 percent this year. If this proposal was approved, the market would fall into the same situation as 2010, he said