As Vietnam's electric vehicle (EV) market expands, relying solely on low prices as a competitive strategy risks locking the country into a low-cost manufacturing model rather than developing an innovation-driven industry, according to an executive at a management consulting firm who spoke to media sources.

Can Vietnam's infrastructure and supply chains keep pace with its EV ambitions, and what is the biggest gap between its goals and the reality of implementation?

Vietnam's vehicle fleet composition, which is dominated by two-wheelers, is an important consideration. In the near term, the country's infrastructure and supply chains are broadly capable of supporting EV growth. Home charging for electric two-wheelers places limited pressure on the power grid, as batteries with capacities of 0.5-2 kWh can be charged overnight without creating significant grid stability concerns.

Approximately half of all components are shared with internal combustion engine vehicles, while Southeast Asia already has an established supply base for these parts. Battery localisation is also progressing, with CATL and Gotion assembling products in Vietnam.

However, a structural challenge could constrain the industry's long-term development. The market is being driven primarily by affordability rather than quality or innovation. Approximately 60%-70% of VinFast's models are priced below US$ 1,000, reflecting demand for low-cost products. While this supports market expansion, it could result in a commoditised, low-specification market rather than one characterised by technological differentiation.

If this trend continues, any significant product quality issues could undermine consumer confidence in electric two-wheelers over the medium term, slowing progress towards the government's decarbonisation goals. The growing focus among several manufacturers on battery-swapping solutions also suggests that competition is increasingly centred on affordability, increasing the likelihood of Vietnam remaining concentrated in the low-cost segment. The country may achieve its sales targets, but volume alone is unlikely to create an innovation-driven or sustainably profitable EV industry.

How ready are Vietnamese consumers to adopt electric vehicles outside major cities, and what policy measures could most effectively encourage the shift from petrol-powered vehicles?

Adoption outside major urban centres is likely to remain slower. Consumers in these areas typically travel longer distances and encounter more varied road conditions, making range anxiety and charging availability more significant concerns.

However, policy measures should focus on areas where demand is concentrated. The majority of Vietnam's two-wheelers are located in major cities such as Hanoi and Ho Chi Minh City, where electrification is already increasing. These urban centres are expected to continue accounting for a significant share of market growth.

Demand-side subsidies alone are unlikely to significantly accelerate EV adoption. Rather than providing temporary support for consumers, Vietnam could prioritise supply-side measures aimed at domestic manufacturing. Battery localisation is already under way, but attention may now need to shift towards electric motors and controllers.

Developing local production through technology-transfer partnerships with Chinese manufacturers, or increasingly export-oriented Indian suppliers, could reduce production costs and affect the industry's competitiveness. Vietnam faces a policy choice: continue subsidising demand and achieve temporary gains, or reduce supply-side costs and pursue structural changes within the industry.

How is Vietnam's EV market expected to develop between 2026 and 2030, given volatile fuel prices and the government's green transition commitments?

Vietnam's electric two-wheeler market is expected to maintain double-digit growth through 2030, reaching approximately 171,600 units, with annual growth of around 11.4%. This outlook is associated with continued urbanisation and rising household incomes.

Another factor is oil prices. Vietnam imports approximately 70%-80% of its crude oil from the Gulf region, and recent tensions in the Middle East have pushed prices to between US$ 80 and US$ 120 per barrel.

Higher fuel prices improve the relative operating cost position of electric motorbikes compared with petrol-powered vehicles. Should geopolitical tensions ease and oil prices moderate, this effect would become less pronounced. However, ongoing uncertainty surrounding US-Iran relations, disruptions in the Red Sea, and the Organisation of the Petroleum Exporting Countries' production strategy suggest that prices are likely to remain within the US$ 70-100 per barrel range, which could influence EV adoption rates.

Which parts of the EV value chain should Vietnam prioritise over the next three to five years to strengthen the competitiveness of its domestic industry?

Vietnam could prioritise investment in electric motor and controller manufacturing, a segment of Southeast Asia's EV value chain that has received relatively limited attention. While considerable attention has been directed towards batteries, motors and controllers influence both production costs and product quality over the long term. At present, these components are almost entirely imported, increasing costs and exposing manufacturers to extended supply chains.

Technology transfer is one potential solution. Several second-tier Chinese suppliers collectively account for around 43% of China's electric motor market. Following changes to China's subsidy regime in 2024, many of these companies now have excess manufacturing capacity and are seeking overseas opportunities. Vietnam's participation in the Regional Comprehensive Economic Partnership, combined with its expanding manufacturing base, could support new production partnerships.

Indian suppliers also represent a potential opportunity. Supported by years of government investment, India's electric motor manufacturers are increasingly export-ready and maintain established relationships within the two-wheeler industry. They could establish assembly facilities or joint ventures in Vietnam.

To attract such investment, Vietnam could introduce targeted regulatory incentives, including tariff reductions, procurement preferences and accelerated certification procedures. Within 12-18 months, these measures could support a transition from import dependence to domestically certified motor production, with implications for profitability, product quality and industrial competitiveness. Without such reforms, Vietnam may continue to operate primarily as a low-cost EV market, while implementation of these measures could support greater technological development within the sector.