Exploring Vietnam's environmental shift toward electric vehicles
Hanoi and Ho Chi Minh City, Vietnam's bustling metropolises, are witnessing a significant shift towards electrification as electric vehicle (EV) companies capitalise on the country's accelerating electrification initiatives.
The initial investment in EVs for ride-hailing platforms can be substantial, requiring financial planning and potential government incentives. However, companies are seizing the opportunity, with EV companies in both cities expanding production capacity, diversifying EV models, investing in charging infrastructure, and targeting broad consumer segments.
One of the key strategies is scaling up manufacturing. VinFast aims to produce 1 million electric motorbikes annually, while startups like Dat Bike plan to triple factory sizes in Ho Chi Minh City. Domestic brands have reached about 1.8 million combined production capacity per year. Companies are also introducing various product lines like mini electric cars and trucks, beyond motorbikes.
Investment by firms such as LG Energy Solution in EV factories and charging stations supports market growth and overcomes infrastructure limitations. The increase in usage among middle-aged consumers, office workers, and delivery drivers alongside students reflects expanding market segmentation.
Competitive pricing with smart tech features helps Vietnamese brands maintain market share against Chinese players and traditional gas motorcycle giants transitioning to EVs, such as Honda, Yamaha, and Piaggio. Foreign firms are launching local assembly or planning plants to quickly serve the Vietnamese market.
However, challenges remain. Despite investments, charging networks need extensive expansion to meet the growing EV fleet’s energy demands. The market is crowded with domestic startups and global giants all vying for share, pressuring smaller players with limited capital. Policy and regulation uncertainty is another hurdle, as companies must navigate evolving policies and compliance requirements.
Consumer acceptance and affordability are also concerns. Although cheaper models targeting students and non-license-required segments drive growth, higher-end EV adoption may be slower due to price sensitivity. Rapid scale-up in production and supply chain localization are critical as Vietnam sees increasing EV consumption and foreign investment in assembly.
Beyond charging infrastructure companies, other investors have numerous avenues to engage in Vietnam's EV transition, including companies involved in battery manufacturing and recycling, electric component suppliers, software developers, and financial institutions offering green financing options.
The demand for electric vehicles, particularly e-motorbikes, is expected to surge before and after 2026, when Hanoi will ban fossil-fuel motorbikes from operating within Ring Road 1. Ho Chi Minh City is planning to accelerate the electrification of ride-hailing services starting next year.
The success of EV companies will depend on a strong brand reputation, reliability, performance, effective marketing, and a comprehensive after-sales service network. The profitability of charging station businesses will depend on factors such as utilisation rates, electricity costs, and pricing strategies.
Vietnam has overhauled its vehicle registration fees, aiming for fairness for localities, and this is expected to reduce consumer costs, simplify tax administration, and provide a timely lift to the recovering transport sector.
Companies and investors can capitalise on the anticipated surge in demand for EVs by establishing public charging stations, exploring battery swapping technologies, and partnering with real estate developers, businesses, and government agencies.
In Ho Chi Minh City, the focus is on electrifying ride-hailing services, creating a direct demand for EVs and potentially e-motorbikes suitable for ride-sharing platforms. Ensuring an adequate charging infrastructure for drivers in Ho Chi Minh City is crucial to avoid operational disruptions and driver downtime. Ride-hailing service providers can benefit from fleet electrification as it enhances brand image, aligns with sustainability trends, and reduces fuel and maintenance expenses.
In conclusion, the electric vehicle revolution is gathering momentum in Vietnam's major cities, with companies aggressively expanding manufacturing, investing in infrastructure, and diversifying product offerings to leverage electrification initiatives. They face challenges typical of a rapidly evolving market, including infrastructure needs, competitive pressures, policy adaptation, and balancing affordability with technology.
Technology plays a crucial role in the expansion of EV production, with companies investing in charging infrastructure, battery manufacturing, and software development for EVs.
Finance is essential for electric vehicle companies, as initial investments can be substantial, requiring financial planning and potential government incentives to overcome infrastructure limitations and meet growing energy demands.
