Vietnam’s Automotive Industry: Industry Overview 2024

Vietnam’s automotive industry has come a long way as middle-class incomes have grown facilitating a shift from motorcycles to cars. However, the automotive industry in Vietnam can be complex, governed by a patchwork of local regulations and free trade agreements. In light of this, this cheat sheet breaks down the key features of Vietnam’s automotive industry that foreign investors should be aware of.

Vietnam’s automotive industry in numbers

Vietnam’s automotive industry has experienced significant growth in recent years, emerging as one of Southeast Asia’s fastest-growing markets. This expansion is driven by increased domestic demand, rising incomes, and supportive government policies.

Vietnam car sales

Vietnam’s automotive sector continues to thrive, with the Vietnam Automobile Manufacturers’ Association, or VAMA, reporting a 7 percent year-over-year increase in total vehicle sales in October. A total of 35,114 vehicles were sold, bringing the year-to-date total to 228,968 units.

Passenger cars led the market, with October sales hitting 26,453 units—up 4 percent from the same month last year. This category remains the backbone of Vietnam’s automotive industry, with year-to-date sales reaching 169,363 units. The steady growth highlights a consistent demand for personal vehicles among Vietnamese consumers.

Vietnam car sales, October vs. September 2024, units

Source: Vietnam Car Sales Tracker

Vietnam car imports

Vietnam continues to import a substantial number of vehicles, particularly from Thailand and Indonesia. Cars imported from these jurisdictions are largely tariff free under several ASEAN free trade agreements.

Vietnam car imports, October vs. September 2024, units

Source: Vietnam Imports Tracker

Most people ride motorbikes in Vietnam.

Firstly, motorcycles are by far the most common form of transportation in Vietnam. Last year, between the five main members of the Vietnam Association of Motorcycle Manufacturers, a total of 2,516,212 motorcycles were sold. This was a decline over 2022 of 16.21 percent, but still considerably higher than the 214,619 passenger cars sold in 2023, according to data from the Vietnam Automobile Manufacturers’ Association. By some estimates there are about 70 million registered motorcycles in Vietnam but only about five million passenger cars.

Car manufacturing in Vietnam is mostly in assembly.

Vietnam’s role in car manufacturing is in most cases right at the end. The parts are typically imported from other parts of the world and then they are put together locally.

This part of the supply chain is mostly dominated by Truong Hai Group–known locally as Thaco Auto–which assembles vehicles for big-name brands like KIA, Mazda, and Peugeot.

However, a number of free trade agreements to which Vietnam is a party have significantly reduced, if not entirely removed import barriers of already assembled vehicles. The ASEAN Trade in Goods Agreement, for example, has reduced car imports from member states to zero.

The European Union Vietnam Free Trade Agreement–the EVFTA–will also see import tariffs on cars from the EU come down by about  6.4 percent a year over the first ten years the deal is implemented. The current import tax on cars imported from the EU in 2024 is 38.1 percent. This will come down to zero by 2030, according to Vietnam’s Customs News.

Vinfast, Vietnam’s own car brand

Vietnam has its own electric vehicle maker, VinFast. The company makes electric motorcycles and cars and was listed on the NASDAQ in 2023 through a Special Acquisition Company. It has a factory in Hai Phong that is a repurposed General Motors factory, with a capacity of 250,000 vehicles a year–though it is still far from working at full capacity.

Electric vehicle ownership in Vietnam is growing.

On the back of VinFast’s high-profile expansion plans, electric vehicle awareness has become widespread in Vietnam. Both electric cars and motorcycles are common on the streets of Hanoi and Ho Chi Minh City with a Deloitte global automotive consumer study finding 30 percent of Vietnamese respondents had expressed an interest in buying an electric vehicle.

That said, charging infrastructure in Vietnam is still limited outside of the big cities and is mostly being developed by Vietnam’s VinFast which can make it difficult for other electric vehicles to find a charge.

Of note, petrol shortages have been common in recent years. Petrol prices are set by the states and have at times fallen out of step with oil prices whereby petrol retailers have been forced to sell petrol at a loss. The response from retailers, in many instances, has simply been to close up shop and wait until selling petrol becomes profitable again creating huge queues at petrol stations around the country. This too may be helping to drive consumers toward electric vehicles.

Electric vehicle incentives in Vietnam

Electric car buyers are eligible for some incentives in Vietnam. For example, they are exempt from registration fees for the first three years and a 50 percent fee reduction for the subsequent two years, per Decree 10/2022/NĐ-CP. 

Vietnam’s Special Consumption Tax (detailed below) is also considerably lower for electric vehicles than their internal combustion engine–ICE–counterparts. For example, the smallest ICE car is taxed at 35 percent whereas the biggest electric car is taxed, at most, 15 percent.

Congestion in Vietnam is becoming a problem.

Built around motorbikes, most of Vietnam’s bigger cities are cramped with narrow streets and very little room for cars.

Not only are the streets struggling to fit all the new four-wheel vehicles, but they also lack parking space. The answer to this has been to park cars on sidewalks and in empty lots but these spaces are limited and have other purposes.

That is to say, Vietnam’s cities are already straining to accommodate the rise in car ownership and the penetration rate is only around 5 percent. If the country is to reach the numbers seen in more developed countries, there will need to be some fairly big investments in infrastructure.

Cars are heavily taxed in Vietnam.

Vietnam has a Special Consumption Tax that is broadly applied to luxury goods. This includes cars. For small cars with less than nine seats and 1.5-litre engines or smaller, it adds an extra 35 percent to the price. However, this increases with every additional litre or so to 150 percent for cars with engines with a capacity of 6 litres or more. Despite this, Lamborghini, Porsche, and McLaren all have dealerships in Vietnam.

Furthermore, cars in Vietnam are also subject to Vietnam’s Value Added Tax–this is normally 10 percent, but, is currently sitting at 8 percent as part of a government stimulus package–and possibly an import tax depending on where the vehicle or vehicles are entering Vietnam from.

Automakers in Vietnam have several industry groups.

There are two key industry groups for automakers in Vietnam: the Vietnam Automobile Manufacturers’ Association and the Vietnam Association of Motorcycle Manufacturers.

Both organisations periodically release data on vehicle sales and have been known to advocate on their members’ behalf for government support. For example, a 50 percent reduction in registration fees was implemented last year as the domestic industry felt the heat of a broader economic downturn and a fall in sales.

What’s next?

Vietnam’s automotive industry is huge but dominated by motorcycles. Cars, however, are becoming more popular though Vietnam’s cities are straining under the congestion and lack of infrastructure. In this light, there are broad opportunities for foreign firms.

Vietnam needs car parks and due to the aforementioned space issues, these will need to go either up or down rather than out. Vertical smart car parks are one option being looked at with one opening earlier this year in Danang. It is however only running at about 5 percent capacity with street parking much cheaper. This problem could, however, probably be fixed with some local parking regulations and enforcement.

Vietnam needs better, high-quality roads. As it stands, at least in Hanoi, the roads are heavily potholed and, in many places, these holes are plugged with cement rather than bitumen. This means raw materials for roads like asphalt as well as road-making equipment and machinery will be needed to renovate existing road infrastructure and ensure it is maintained moving forward.

All of that said, Vietnam’s automotive industry has a lot of moving parts and as with most developing economies the business environment can change quickly. With this in mind, firms and individuals with an interest in Vietnam’s automotive industry can best keep up with the latest developments by subscribing to the-shiv.

Last updated December 4, 2024.