In the global context of electric vehicle (EV) manufacturing, Vietnam’s role is rapidly gaining prominence. As foreign investors seek opportunities in sustainable transportation, Vietnam’s EV market stands as a beacon of promise. This article serves as a comprehensive guide for these investors, elucidating the abundant prospects and incentives within Vietnam’s electric vehicle manufacturing landscape. Against the backdrop of an evolving EV market, the Vietnamese sector’s growth trajectory presents a compelling case for investment. Join us in exploring Vietnam’s dynamic EV companies, market trends, government policies, and the wealth of opportunities it offers to savvy investors looking to capitalize on the electric mobility revolution.
Overview of Vietnam’s EV Manufacturing
Private Enterprises Driving Vietnam’s EV Revolution
Vietnam’s EV manufacturing sector is in its nascent stages, yet it holds immense promise for substantial growth. The Vietnamese government has set ambitious targets, aiming for electric vehicles (EVs) to constitute 10% of all new vehicles sold in the country by 2030. Forecasts paint a compelling picture of this burgeoning market, with projections suggesting that by 2028, Vietnam could boast one million electric cars, a number expected to surge to 3.5 million by 2040.
Private enterprises have been the primary force propelling the transformation of Vietnam’s electric vehicle (EV) market. While the market’s early emphasis was on electric scooters, dedicated initiatives from the private sector have accelerated Vietnam’s rise to prominence in the EV industry. Significantly, Vietnam achieved the distinction of becoming the inaugural Southeast Asian nation to establish its electric car manufacturing company, positioning itself as a potential regional disruptor, and even rivaling China’s dominant role.
Surging Growth in Electric Two-Wheelers (E2W)
The increasing market share of E2W has further accelerated the transition towards electrification in Vietnam. The E2W market share surged from 5.14% in 2019 to 8.54% in 2020 and reached 10% in 2021. Transitioning from traditional two-wheelers to their electric counterparts is relatively straightforward due to component similarities and high local production rates. Vietnam boasts seven E2W manufacturers, with six being Vietnamese companies, including VinFast, Pega, Anbico, Detech, DK Bike, and Datbike.
Major Players in Vietnam’s EV Landscape
Leading the charge, VinFast, a subsidiary of VinGroup, has emerged as a prominent domestic EV manufacturer in Vietnam. In 2021, VinFast made waves by launching two electric car models, VF e35 and VF e36, at the 2021 Los Angeles Auto Show. Furthermore, VinGroup established VinBus, which operates e-buses in multiple Vietnamese cities. With ambitious production targets, VinFast aims to manufacture 20,000 electric cars and approximately 1,500 buses by 2022.
Vietnam’s EV market has attracted a lot of major players such as Wuling HongGuang, Skoda and Hyundai. Many of these companies have already introduced or have plans to launch new products in Vietnam in 2022. For instance, KIA introduced the KIA EV6 to the Vietnamese market in mid-2021, with plans for sales starting in 2022.
The number of EVs in Vietnam has witnessed rapid growth in recent years. From a mere 167 vehicles in 2018, the count surged to nearly 12,600 by July 2023. However, the majority of these vehicles consist of passenger cars and city buses, showcasing the diverse potential for further expansion in various segments of the EV market.
Opportunities for Foreign Investors in EV Manufacturing
Opportunities for foreign investors in Vietnam’s electric vehicle (EV) manufacturing sector extend far beyond the promising market landscape. Several factors make Vietnam an attractive investment destination in this rapidly evolving industry.
Explosive Demand: As per the International Trade Administration, Vietnam stands out with an extraordinary growth potential due to surging demand. With more than 60% of its population owning motorcycles and a car ownership rate of only 5.7% in 2020, Vietnam presents a unique growth opportunity. Forecasts indicate that car ownership could surge to 30% by 2030, representing a remarkable 10.5% annual growth rate. This growing demand for passenger vehicles is unparalleled in many Asian markets.
Rising Middle Class: Vietnam’s young and expanding middle class exhibits a strong inclination towards cutting-edge technologies, fuel efficiency, and environmental consciousness. This demographic alignment positions the country for double-digit growth in the EV market. The middle class’s increasing purchasing power and environmental awareness create a receptive audience for EV adoption.
Environmental Imperatives: Urban centers in Vietnam, such as Hanoi and Ho Chi Minh City, grapple with air pollution and traffic congestion due to the prevalence of gas-powered motorbikes and ride-sharing fleets. To address this issue, the government aims to gradually restrict motorbikes on city streets by 2030 in major urban centers, opening the way for EVs’ adoption. Vietnam’s commitment to achieving net-zero carbon emissions by 2050 further emphasizes the importance of transitioning to green energy and electric vehicles.
Government Support: The Vietnamese government is actively promoting green energy transformation and emissions reduction in the transport sector. An action program has been approved to encourage the production, assembly, import, and use of electric road vehicles, along with the development of charging infrastructure. By 2050, the goal is to convert all road motorized vehicles to electricity and green energy, making EVs an integral part of the country’s sustainable transportation future.
Skilled Workforce: Vietnam boasts a young and educated workforce, well-versed in both traditional manufacturing and the evolving EV industry. This skilled labor pool facilitates efficient production processes and innovation within the sector.
Strategic Location: Situated at the heart of Southeast Asia, Vietnam offers strategic access to regional markets. Its proximity to economic powerhouses like China and the ASEAN region enhances the potential for market expansion, making it an ideal manufacturing hub for EVs.
Export Opportunities: Vietnam’s advantageous geographical location, coupled with trade agreements, positions it as a launchpad for international expansion. EV manufacturers can leverage Vietnam to access markets in Southeast Asia and beyond, aligning with global trends favoring sustainable transportation.
Foreign investors have already witnessed success in Vietnam’s EV sector, exemplified by VinFast, a domestic manufacturer with international investments. VinFast’s achievements, including electric car and bus production, underscore the tangible opportunities and potential returns in the Vietnamese market. As the nation accelerates its transition to electric mobility, foreign investors stand to benefit from a dynamic and promising industry landscape.
Incentives and Government Support for EV Manufacturing
Vietnam’s electric vehicle (EV) industry is still in the early stages of policy development and incentives. While explicit frameworks are lacking, the government has taken notable steps to promote EVs as part of its sustainable development plan. These efforts are aligned with four key areas: sustainable development, green growth, climate change, and environmental protection laws.
One significant policy document, Resolution 55/NQ/TW, issued in February 2020, marks a pivotal moment. It outlines the National Energy Development Strategy until 2030, with a Vision to 2045, emphasizing the promotion of e-mobility and energy storage in line with global trends.
Decision 1095/QĐ-BGTVT, dated June 17, 2021, focuses on building the National Transportation Vehicle Development Strategy. This strategy aims to develop environmentally friendly vehicles and is set to be implemented during 2022-2023 by the Transport Development and Strategy Institute.
Vietnam’s commitment to sustainability is further underscored by its acceptance of the Paris Agreement in July 2020. The updated Nationally Determined Contribution (NDC) includes a pledge to reduce greenhouse gas emissions by 15.8% in 2030. EV adoption plays a vital role in achieving these emissions reductions. In January 2022, Ho Chi Minh City initiated studies on e-transportation development, signaling the intent to integrate e-vehicles in the southern hub.
Decision No. 1393/QĐ-TTg from 2012 laid the groundwork for the National Green Growth Strategy (NGGS). The Ministry of Planning and Investment is currently formulating a new NGGS for 2021-2030, with a focus on vehicle electrification. Several provincial Green Growth Action Plans also encompass transportation and electrification goals.
Local strategies, such as Hanoi’s Green Growth Strategy and Nha Trang’s Green Growth Strategy, set ambitious targets for e-motorcycles and e-buses, reflecting growing interest in EVs at the city level.
Moreover, the National Automobile Development Strategy (2021-2050), proposed by the Vietnam Automobile Manufacturers Association (VAMA), aims to stimulate manufacturing and significantly increase the use of e-vehicles. The plan envisions a production capacity of 3.5 million electric vehicles by 2040.
In recent developments, the government has issued new decisions, including Decree 10/2022, effective from March 1, 2022, which grants exemptions from registration fees for Battery Electric Vehicles for the first three years and a 50% reduction for the subsequent two years. Law no. 03/2022/QH15, also effective from March 1, 2022, has reduced the excise tax rate for battery electric vehicles to a range of 1-3% for five years.
While these steps are promising, the government recognizes the need for stronger incentives and support policies for both local and foreign-invested EV manufacturers. Efforts to expand the charging station network and incentivize EV consumers further underscore Vietnam’s commitment to fostering a vibrant EV industry and advancing sustainability goals.
In conclusion, Vietnam’s electric vehicle manufacturing sector offers an enticing landscape for foreign investors eyeing the EV market. With an expanding middle class, rapid urbanization, and growing environmental consciousness, Vietnam is on the cusp of a significant shift in the electronic vehicle market. The government’s supportive policies and incentives for EV companies underscore the nation’s commitment to sustainable transportation. As Vietnam charges ahead on its path to becoming a key player in the global electric vehicle manufacturers arena, foreign investors can’t afford to overlook this thriving opportunity. To embark on your journey in Vietnam’s electric vehicle manufacturing sector, Viettonkin stands ready as your trusted partner. Contact us today to harness the potential of this vibrant market for electric vehicle companies.