Introduction

Electric vehicles (EVs) are gaining popularity around the world as a cleaner and more efficient alternative to internal combustion engine (ICE) vehicles. EVs run on electricity stored in batteries or generated by fuel cells, and have lower emissions, lower fuel costs, and lower maintenance costs than ICE vehicles. EVs also offer benefits for energy security, climate change mitigation, and urban air quality. However, EVs also face barriers such as high upfront costs, limited range, lack of charging infrastructure, and consumer awareness and acceptance.

In this article, we explore the current state and prospects of the EV market in Vietnam, a Southeast Asian country with a population of about 100 million and a fast-growing economy. We will use the data and insights gathered in the market and prepared by at.Pointe, a consulting firm. The article covers various aspects of the EV market in Vietnam, such as energy supply, policies and incentives, customer insights, charging infrastructure, and automotive market. We will summarize the main findings and implications and provide some recommendations to enter and succeed in the Vietnamese EV market.

Key Points:

• Energy Supply: Vietnam’s energy market is expanding, with significant potential for renewable energy sources like wind and solar power. However, challenges such as growing electricity demand, reliance on imported fuels, and the need for grid improvements remain.
• Policies and Incentives: The government has implemented various measures to promote EV adoption, including lower excise taxes, registration fee exemptions, and targets for EV sales and penetration.
• Customer Insights: Vietnamese consumers show increasing interest in EVs, particularly among younger, urban populations. However, high upfront costs, limited range, and insufficient charging infrastructure are major barriers.
• Charging Infrastructure: The current infrastructure is underdeveloped, with Vinfast leading the way in providing charging points. Future improvements are expected as demand grows and government support increases.
• Automotive Market: The market is dominated by foreign brands and ICE vehicles, but EVs, especially from domestic manufacturer Vinfast, are gaining traction. The premium EV market remains small but has potential for growth.

This comprehensive analysis provides valuable insights and recommendations for businesses looking to enter and succeed in the Vietnamese EV market.

Energy Supply

Vietnam is one of the fastest growing energy markets in Asia, with an average annual electricity demand growth of 9% to 12% over the next decade. The country's energy supply is currently dominated by coal, natural gas, and hydro power, but it has a large potential for renewable energy sources such as wind and solar power. Vietnam has committed to achieve net zero emissions by 2050 and has set ambitious targets for the adoption of EVs, aiming to have 15% to 20% EV penetration by 2030 and ban ICE vehicles by 2050.

However, Vietnam also faces several challenges in its energy transition, such as:

• Growing demand: Vietnam's electricity system has a total installed capacity of about 80 GW, but it is expected to need up to 150 GW by 2030 and 570 GW by 2050. The country may face power shortages and grid instability, especially in the manufacturing hub of Ho Chi Minh City.
• Net importer of fuels: Vietnam's domestic sources of coal and gas are becoming exhausted, and the country has turned from a net exporter to a net importer of energy since 2015. Vietnam will have to rely on imported liquefied natural gas (LNG) and coal to meet its energy needs, which poses risks for energy security and affordability.
• RE supply growth: Vietnam has seen a rapid growth of solar and wind power in recent years, reaching about 17 GW and 4 GW of installed capacity respectively by the end of 2021. However, the integration of these variable renewable energy sources into the grid requires additional transmission capacity and improved operational strategies to avoid curtailment and ensure reliability.
• Environment and climate change: Vietnam's power sector accounts for 70% of the total emissions from the energy system and 60% of the total national emissions. The country's coal-fired power plants are also a major source of air pollution and health problems. Vietnam needs to phase out coal and increase the share of renewable energy and EVs to achieve its net zero goal and improve its environmental quality.
• Affordable and secure supply: Vietnam's electricity price needs to stay reasonable while maintaining a high level of security. The country's electricity tariff is regulated by the government and is based on a multi-tier structure that varies by voltage level and time of use. The tariff also includes a cross-subsidy mechanism that charges higher rates for industrial and commercial customers and lower rates for residential and agricultural customers. The tariff needs to reflect the true cost of electricity generation and transmission and provide incentives for energy efficiency and demand response.

Vietnam has a strong potential for EV adoption, but it also needs to address the issues of its power sector, such as diversifying its energy sources, enhancing its grid infrastructure, reducing its emissions and pollution, and ensuring its energy security and affordability.

Policies and Incentives

Vietnam has no explicit policy frameworks and incentives for the EV industry, but it has been applying some measures to promote EVs through its sustainable development plan, which includes four focused areas: sustainable development, green growth, climate change, and environmental protection laws. Some of the policies and incentives that affect the EV market in Vietnam are:

• Financial support: EVs are subject to a lower excise tax rate than ICE vehicles, which ranges from 3% to 11% depending on the vehicle type and engine capacity, compared to 35% to 150% for ICE vehicles. EVs are also exempt from registration fees until 2025 and will pay 50% of the fee applicable to ICE vehicles with the same number of seats from 2025 to 2029. The registration fee for ICE vehicles is 10% of the vehicle value.
• Legislation aims: The government has set targets for EV sales and penetration, which are expected to grow at a compounded annual growth rate (CAGR) of over 20% by 2030, reaching over 20% of the total vehicle market. The government also plans to ban ICE vehicles from 2050, and trial ICE bans in selected areas and districts.
• Policy guidance: The Ministry of Transport is responsible for developing infrastructure and policies for EVs, including charging infrastructure, aiming for 100% EVs by 2050. The ministry has proposed a scheme for charging station pricing, which is categorized by voltage level and time of use, and ranges from 68% to 205% of the average retail electricity price. The ministry has also suggested three types of EVs to receive incentives, including battery-powered EVs, fuel cell EVs, and solar EVs.
• Homologation: The certification and homologation process for EVs is like ICE vehicles, except that no exhaust emission test is required, but some additional testing for batteries and electric equipment is needed. The country has adopted the international standard for EV charging (IEC 61851), and has some regulations on charging station installation, operation, and safety.
• Import: The import of EVs is subject to the same requirements as ICE vehicles, such as the need for an automobile import license from the Ministry of Industry and Trade, and the homologation on imported vehicles. The import of EVs is also subject to a 0% preferential import tax rate for raw materials and components that are not domestically produced, until 2024.

Customer Insights

Generally, Vietnam has a low market readiness score across multiple metrics, which measure the acceptability, affordability, and availability of EVs in a country. This score indicates that ICE vehicles and EVs are not at the same level in terms of customer attractiveness, and that EVs face some disadvantages compared to ICE vehicles. However, the score also shows some positive factors, such as the high rate of homeownership, which can facilitate home charging, and the high rate of smartphone penetration, which can enable digital services and connectivity for EVs.

Vietnam is following the global trend of electrification and connectivity, as customers are increasingly interested in EVs and advanced features such as safety, convenience, and driver assistance. However, customers in Vietnam also prefer a high level of customization and complexity in their vehicles, which may pose some challenges for standardization and mass production. The market also shows strong growth in lower segments and large body types, such as SUVs and MPVs, which are more suitable for family use and long-distance travel.

Customers in Vietnam have different preferences for EVs depending on their age, income, and location. Younger customers (18-34 years old) have higher income and higher willingness to buy EVs than older customers (35-54 years old), but they also have higher expectations for performance, range, and design. Customers in urban areas have a higher awareness and acceptance of EVs than customers in rural areas, but they also face more challenges such as parking space, traffic congestion, and air pollution. Customers in different regions also have different preferences for EV models, brands, and features, depending on their local culture, climate, and infrastructure.

The main motivations for customers to buy EVs in Vietnam are transportation convenience, family health, and vehicle options and features. Customers value the convenience of EVs, such as lower fuel and maintenance costs, easier parking, and smoother driving. Customers also care about the health benefits of EVs, such as lower emissions, noise, and vibration, which can improve the air quality and comfort for themselves and their families. Customers also want to have more choices and features in EVs, such as different models, sizes, colors, and technologies, which can enhance their personalization and satisfaction.

The main barriers for customers to buy EVs in Vietnam are high upfront costs, limited range, lack of charging infrastructure, and low consumer awareness and acceptance. Customers are deterred by the high initial price of EVs, which is much higher than ICE vehicles, and the lack of financial incentives and subsidies from the government. Customers are also concerned about the limited range of EVs, which may not meet their travel needs and preferences, especially for long-distance trips and rural areas. Customers are also discouraged by the lack of charging infrastructure, which is insufficient, unevenly distributed, and incompatible with different EV models and standards. Customers are also influenced by the low awareness and acceptance of EVs, which are still new and unfamiliar to many people, and face some social and psychological barriers, such as peer pressure, safety concerns, and risk aversion.

Charging Infrastructure

Current situation

The EV charging infrastructure in Vietnam is still underdeveloped and fragmented, with no clear policy and public funding from the government. The main provider of charging infrastructure is Vinfast, a domestic EV manufacturer, which has installed over 8,000 charging points and mobile charging services across the country. However, these charging points are exclusive for Vinfast vehicles, and are not compatible with other EV models. Other EV manufacturers, such as Audi, BMW, Mercedes-Benz, Hyundai, and Hongqi, have also installed some charging points at their dealer sites, but these are mostly for marketing and demonstration purposes, and have limited sales volume. There are also some third-party providers, such as EVN, EV-ONE, EBOOST, and GreenCharge, which offer charging stations and equipment for commercial and residential customers, but these have a small market share and low network density.

Outlook

The EV charging infrastructure in Vietnam is expected to improve and expand in the future, as the demand for EVs increases and the government provides more support and guidance. The government has assigned the Ministry of Transport to develop infrastructure and policies for EVs, including charging infrastructure, and has proposed a scheme for charging station pricing and standards. The government has also set targets for EV penetration and ICE ban, which will create more incentives and pressure for charging infrastructure development. The EV charging infrastructure in Vietnam is likely to follow a mixed model, with a combination of home charging, public charging, and workplace charging, depending on the customer needs, preferences, and behavior. The home charging segment is expected to dominate, as most customers in Vietnam prefer to charge their EVs at home, using a mix of grid electricity and renewable energy. The public charging segment is expected to grow, as more customers need to charge their EVs on the road, especially for long-distance trips and rural areas. The workplace charging segment is expected to emerge, as more employers offer charging facilities and services for their employees and customers.

Competitor activities

The EV charging infrastructure in Vietnam is witnessing a strong influx of competitors, both domestic and foreign, which are trying to capture the market opportunities and challenges. The main competitor is Vinfast, which has a wide and exclusive network of charging points and mobile charging services and plans to implement 3,000 more charging stations by 2030. Vinfast also cooperates with Petrolimex, a state-owned oil and gas company, to install charging points at gas stations. Other EV manufacturers, such as Audi, BMW, Mercedes-Benz, Hyundai, Hongqi, MG, Porsche, and Wuling, also offer charging facilities and equipment for their customers, either at their dealer sites or at their homes. Some of these manufacturers also collaborate with third-party providers, such as EVN, EV-ONE, EBOOST, and GreenCharge, to expand their charging network and options. Some foreign EV manufacturers, such as BYD, GAC, and Changan, also plan to build factories and supply chains in Vietnam, which may include charging infrastructure development.

Automotive Market

Total automotive market

The total automotive market in Vietnam is recovering from the COVID-19 pandemic and the supply chain disruptions is expected to grow at a significant CAGR between 2023 and 2030. The market is dominated by foreign brands, such as Toyota, Hyundai, Kia, Mazda, and Ford, which account for over 80% of the market share. The market is also dominated by ICE vehicles, which account for over 80% of the sales volume. However, the market also shows a strong growth of EVs, especially battery electric vehicles (BEVs), which account for over 10% of the sales volume. The market also shows a strong preference for large body types, such as SUVs and MPVs, which account for over 50% of the sales volume.

EV market

The EV market in Vietnam is still at its early stages, but is growing rapidly, with a projected (CAGR) of over 20% by 2030. The market is dominated by Vinfast, a domestic EV manufacturer, which accounts for over 90% of the EV sales volume, with six models of SUVs. Entry-level vehicles account for over 80% of the EV sales volume, with prices ranging from $25,000 to $40,000. In addition, there will be market influences by Chinese EV manufacturers, such as BYD, GAC, and Changan, which plan to enter and expand in the Vietnamese market, with lower prices and higher localization rates.

Premium EV market:

The premium EV market in Vietnam is very small, with a low sales volume and a low market share. The market is mainly served by foreign EV manufacturers, such as Mercedes-Benz, Audi, BMW, and Porsche, which offer high-end models of sedans, SUVs, and coupes, with prices ranging from $100,000 to $300,000. The market is mainly driven by niche customers, such as wealthy individuals, corporate executives, and government officials, who value the status symbol, performance, and technology of premium EVs. The market is also driven by some incentives, such as lower taxes, lower registration fees, and lower energy costs for EVs.

Conclusion and Recommendations

The EV market in Vietnam is a growing market with challenges and opportunities for participants that aim to enter and succeed in this market. Based on the data and insights from the, we can draw the following conclusions and recommendations:

• The EV market in Vietnam is driven by the government's commitment to achieve net zero emissions by 2050, and the customer's interest in EVs as a cleaner and more convenient mode of transportation. However, the market also faces barriers such as high upfront costs, limited range, lack of charging infrastructure, and low consumer awareness and acceptance. Therefore, participants should leverage their strengths in offering affordable, reliable, and innovative EVs, and address the customer's pain points and expectations.
• The EV market in Vietnam is dominated by Vinfast, a domestic EV manufacturer, which has a wide and exclusive network of charging points and mobile charging services and offers entry-level SUVs with competitive prices. However, the market also has a potential for foreign EV manufacturers, such as BYD, GAC, and Changan, which plan to enter and expand in the Vietnamese market, with lower prices and higher localization rates. Due to these reasons manufacturers should differentiate themselves from the existing and emerging competitors, and position themselves as a trusted, value-added, and customer-centric EV brand.
• The EV market in Vietnam is segmented by different customer groups, such as younger customers, urban customers, and premium customers, who have different preferences, motivations, and barriers for EVs. Market participants should tailor their EV offerings and marketing strategies to the specific needs, preferences, and behavior of each customer segment, and create a strong customer relationship and loyalty.
• The EV market in Vietnam is influenced by various factors, such as energy supply, policies and incentives, customer insights, and charging infrastructure, which shape the market opportunities and challenges for EVs. Therefore, participants should monitor and analyze the market trends and dynamics and adapt its EV products and services to the changing market conditions and customer demands.