Vietnam has rapidly become one of ASEAN’s most attractive host countries for Foreign Direct Investment (FDI), but the era of measuring success by volume of investment alone is coming to an end. The real challenge for the country is improving the quality of foreign direct investment to foster sustainable, long-term growth. The goal of attracting […]
The electric vehicle (EV) manufacturing industry in Vietnam is gaining prominence as the world embraces a profound shift toward electric mobility. Vietnam stands at the forefront of this transformation, poised to play a pivotal role in the global EV landscape. In the following sections, we will examine the current state of EV manufacturing in Vietnam, explore its remarkable growth potential and the opportunities it presents, and delve into the challenges faced by the industry. Our aim is to provide valuable insights into the landscape of electric vehicle manufacturing in Vietnam, offering key takeaways for readers interested in this exciting industry.
The Current State of Electric Vehicle Manufacturing in Vietnam
Government-Led Transition to Green Mobility
In recent years, Vietnam has been on an accelerated journey toward the development of its electric vehicle (EV) manufacturing sector. The government's commitment to net-zero emissions by 2050 has catalyzed this transformation. Policies and guidelines have been established to encourage the growth of low- and zero-emission transport options, aligning Vietnam with the global trend of sustainable mobility.
Rising Consumer Embrace of Eco-Friendly Transport
Many experts posit that the Vietnamese population is progressively embracing eco-friendly vehicles. In the coming years, as transportation infrastructure and electric EV charging infrastructure become more prevalent, local consumers are expected to increasingly opt for EV. Vietnam's expanding middle class, predominantly residing in urban centers, aligns with the objectives of smart cities, making green vehicles an appealing choice for those looking to contribute to environmental preservation by reducing pollution.
Projections and Current Landscape of Electric Vehicle Manufacturing in Vietnam
The Vietnam Automobile Manufacturers Association (VAMA) projects a bright future for the nation's electric vehicle landscape. Their forecast anticipates Vietnam reaching one million electrified vehicles by 2028, with an ambitious goal of 3.5 million electric vehicles on the road by 2040.
Currently, local EV manufacturing is spearheaded by two automakers, TMT Motor and VinFast. VinFast, a subsidiary of Vingroup, has invested significantly in its Haiphong complex, boasting cutting-edge, highly automated production lines capable of manufacturing up to 250,000 units annually, with plans for expansion to 950,000 units per year by 2026. In February, TMT Motor joined forces with a General Motors and SAIC-Wuling joint venture to produce and distribute Wuling-brand electric vehicles in Vietnam.
Additionally, the Vietnamese market has attracted attention from prominent Chinese EV manufacturers like Chery, BYD, Nio, and Xpeng. These companies are exploring partnerships with domestic entities to establish local EV production facilities. These developments collectively showcase Vietnam's growing prominence in the global electric vehicle manufacturing landscape.
Growth Potential and Opportunities in the Vietnamese Electric Vehicle Manufacturing Industry
Unprecedented Growth in Vietnam's Automobile Market
The automobile market in Vietnam is experiencing remarkable growth, with approximately 22 cars for every 1000 people in the country. This surge in demand is underscored by statistics indicating that over 50 percent of Vietnamese individuals expressed a desire to acquire a new car in 2022. However, this rapid growth has not come without challenges, particularly concerning environmental sustainability. Transportation stands as the leading contributor to greenhouse gas emissions in Vietnam, accounting for a substantial 19.3 percent of annual emissions. Moreover, concerning air quality, Vietnam ranked 36th globally for air pollution, with PM2.5 fine dust levels exceeding WHO recommendations by 4.9 times. In response to these environmental concerns and growing health burdens, Vietnamese consumers are actively seeking eco-friendly transportation alternatives.
Governmental Support and Tax Incentives for Electric Vehicles
In line with these environmental concerns, the Vietnamese government's Decision No. 950/QD-TTg, which approved the Scheme for the development of smart sustainable cities in Vietnam, emphasizes the significance of environmentally responsible solutions. Electric vehicles (EVs) are notably favored due to their alignment with technological and environmental standards.
To further support this growth, the Ministry of Finance introduced a tax incentive program for the automobile supporting industry in 2020. Enterprises involved in manufacturing, processing, and assembly of auto components and spare parts have enjoyed import tax exemptions on raw materials and supplies for production. This policy is set to continue until 2027, fostering a favorable environment for EV manufacturing.
Additionally, legislative amendments have significantly reduced taxes on electric cars. A notable change came in January 2022 when the 15th National Assembly approved Law No. 03/2022/QH15, reducing excise tax rates for electric cars to 1-3% (applied from March 1, 2022, to February 28, 2027) and 4-11% (applied from March 1, 2027).
Furthermore, Decree No. 10/2022/ND-CP, issued by the government, introduces a 0% registration fee for battery electric cars registered within three years of March 1, 2022. Over the subsequent two years, this fee will equal 50% of the fee applied to petrol and diesel cars with the same seating capacity. For vehicles undergoing re-registration, a 2% registration fee is applicable, irrespective of whether they are electric or internal combustion engine vehicles.
Challenges and Considerations in Electric Vehicle Manufacturing
Policy Initiatives and Subsidies for Electric Vehicle Adoption
The Vietnamese electric vehicle (EV) manufacturing industry, while promising, faces several key challenges. One of the most critical areas of concern is the relative modesty of government policies in comparison to those implemented by countries in Southeast Asia and worldwide. While Vietnam has initiated policies aimed at supporting EV adoption, experts emphasize that a more substantial and immediate impact can be achieved through robust subsidy policies. This approach includes subsidies for both manufacturers and buyers of electric vehicles. Successful implementation of such policies has been witnessed in countries like the United States, the European Union, and even in Southeast Asian nations like Thailand.
Investment and Infrastructure Barriers
A significant hurdle in Vietnam's electric vehicle development landscape is the scarcity of supporting policies related to credit, investment, and trade for businesses operating in this sector. Unlike some other countries, Vietnam has not yet introduced comprehensive measures to encourage and facilitate investments in EV manufacturing. Electric vehicle projects typically demand substantial and long-term capital resources, which presents challenges in securing financial support from banks and other financial institutions.
Infrastructure development, including charging stations and battery recycling facilities, also poses a considerable challenge for the Vietnamese EV industry. The expansion of these essential components is vital for widespread EV adoption. Furthermore, building a robust supply chain for EV components and batteries is crucial to ensuring a consistent and cost-effective production process.
Workforce Development and Sustainable Electric Vehicle Manufacturing
Workforce training is another area that demands attention. With the growing demand for skilled professionals in EV manufacturing, there is a need for tailored training programs and educational initiatives to equip the workforce with the necessary skills and knowledge.
Sustainable and eco-friendly manufacturing practices represent a fundamental consideration in the EV industry. As the world increasingly gravitates toward environmentally responsible production methods, it is imperative that Vietnam's EV manufacturers adhere to stringent sustainability standards. This includes minimizing the environmental impact of production processes and the materials used.
Regulatory frameworks and safety standards are pivotal in ensuring the quality and safety of electric vehicles. Clear and comprehensive regulations are required to guide manufacturers in meeting safety and quality benchmarks. Compliance with international standards will not only enhance the reputation of Vietnamese EVs but also facilitate export opportunities.
Final Thoughts
The landscape of electric vehicle manufacturing in Vietnam holds immense promise, driven by growing consumer interest, supportive policies, and a commitment to sustainability. As Vietnam aims to play a pivotal role in the global transition to electric mobility, it is crucial to recognize the challenges and opportunities inherent in this journey. To thrive in this evolving industry, businesses and investors require expert guidance and strategic partnerships. Viettonkin stands as a trusted ally, offering valuable insights and support to navigate the dynamic landscape of electric vehicle manufacturing in Vietnam. Reach out to Viettonkin today to embark on this exciting journey towards a sustainable and electrifying future.
