At present, there are around six million registered vehicles in Vietnam, with about 94 per cent running on fossil fuel. While many people are concerned about Vietnam’s reliance on coal-fired plants for electricity, despite the country’s commitment to achieving net-zero by 2050, a strong push from new energy vehicles development could potentially trigger a chain reaction across the entire energy supply chain.
In some way, this is similar to the impact seen in the telecommunications industry with the rapid adoption of mobile phones and the internet, spurring innovation in related industries, revolutionising the way we communicate, improving social connectivity, and providing instant access to resources that enhance learning experiences and facilitate telemedicine.
The list goes on. While there are many reasons why this makes sense, six key reasons can be highlighted.
Firstly, Vietnam imports approximately 10 million metric tons of refined petroleum, valued at around $9 billion annually, for domestic consumption. The cost saved from reduced imported fuel consumption can be invested in new energy and translated into tax and other forms of incentives for vehicle buyers.
It is necessary to point out thatcountries leading the global electric vehicle (EV) charge such as China, Thailand, and the US introduced subsidies for purchase years ago. In September 2023, the Ministry of Finance rejected a proposal to provide direct financial assistance of $1,000 to EV manufacturers and buyers.
Norway, a world-leading oil exporting country with a population of just 5.57 million, has created a fund of $1.7trillion and looks to achieve the goal of becoming the first country in the world to completely phase out fossil fuel vehicles by next year. The Norwegian Road Federation has confirmed that EVs have surpassed petrol cars to become the most popular type of personal vehicle in the country.
Secondly, the widespread adoption of new energy vehicles could lead to advancements in battery technology, which would not only benefit the automotive industry but also have broader applications in energy storage for renewable sources such as solar and wind power.
This could contribute to more efficient and reliable energy production and consumption, thereby reducing the reliance on traditional fossil fuels.
Thirdly, the shift to new energy vehicles has the potential to drive the rapid evolution of innovative business models for charging infrastructure. VinFast, which is leading the country’s EV charge, has recently suggested a franchise charging station business model that drew the interest of many stakeholders.
According to Applied Technical Systems JSC, when the share of EVs reaches 25 per cent, it will increase the system’s peak load by up to 30 per cent. This, in turn, could spur investment in smart grid technologies and infrastructure. Smart grids play a crucial role in optimising energy distribution, minimising wastage, and integrating different renewable energy sources into the power grid.
This transformation in energy infrastructure has the potential to create more robust and sustainable energy systems, fostering economic growth, and generating new employment prospects in the clean energy industry.
| Towards Efficient Public Transport Systems Many would argue that an efficient public transport system, particularly a metro in major cities, offers a much more efficient travel solution to residents, reduces traffic congestion, and lowers carbon emissions more effectively, as seen in developed countries. However, it has taken Hanoi and Ho Chi Minh City over a decade to complete only one or two metro lines in each city. Additionally, for these public transport systems to be truly efficient, they need to be interconnected. These public transport systems require significant investment and take decades to build. Hence, in the foreseeable future, Vietnam will still have to rely on vehicles to meet the fast-growing travel needs of its people in major urban areas while developing efficient public transport systems. |
Next, it is crucial to acknowledge the significant disparity in the availability of green credit, especially in relation to providing favourable loans for EV buyers. Currently, new energy vehicle buyers are not entitled to any preferential treatment by local banks, as the availability of credit for their purchases is limited compared to traditional vehicles.
Article 149 of the Environmental Protection Law, which took effect in 2022, provides green credit for various projects, including efficient use of natural resources, climate change adaptation, waste management, pollution control, and environmental improvement. However, it excludes means of transportation.
A BYD Vietnam representative, a subsidiary of China’s leading vehicle company, has suggested that the loan to-value ratio for EV purchases should be increased to 80-85 per cent, similar to that of conventional cars. Closing this gap in credit access would enhance the accessibility of such vehicles for thousands of vehicle buyers annually, who might otherwise go for more traditional vehicles. China, currently the world’s largest producer and market for EVs, has implemented favourable policies, including subsidies ranging from $450 to $2,000 per EV.
In addition, Vietnam recently saw the departure of Ørsted, the world’s largest renewable energy producer, and Equinor, also a top renewable energy developer. But as the European Chamber of Commerce in Vietnam highlighted in late September to announce their flagship annual green exhibition, the departure of Equinor only meant that as major global investors, they needed to shift their priorities in response to business demands, and the move did not signal a lack of potential for Vietnam as a renewable energy destination.
Vietnam has a track record of 35 years of attracting foreign investment, and the government has made clear it is committed to attracting quality foreign investment going forward. The push for new energy vehicles will necessitate an increase in clean energy supply, putting pressure on the government to swiftly enhance the regulatory framework for investment in renewable energy.
Finally, it is widely known that the automotive industry has the potential to drive national industry strategies and programmes. In a market economy, economies of scale and competition complement each other in the sense that the former helps bring production cost down while the latter ensures that consumers benefit from the best price quality producer, assuming all other things being equal. Thailand and Indonesia have already demonstrated this potential within the ASEAN region by leveraging their automotive industries for broader national development.
In the 1990s, Vietnam made significant strides with its first automobile industry strategy, attracting major global manufacturers like Ford, Honda, Toyota, Mercedes-Benz, and Mitsubishi to invest in vehicle assembly in the country. However, after 30 years of development, Vietnam’s automotive industry remains on the low end of the global industry value chain, according to the latest draft vehicle strategy by the Ministry of Industry and Trade.
The country now stands at a critical juncture and needs to make bold policy decisions to embrace the new energy vehicle revolution and rapidly propel its domestic automotive industry forward to achieve its net-zero targets, or it risks falling behind neighbouring countries once again.
