Do automakers dream of electric leap?

VinFast has unveiled more of its electric vehicle range, with the goal of leading the world in greener cars and motorbikes, photo Le Toan

The electric vehicle market in Vietnam is already heating up this year. Top automaker VinFast announced it would stop producing internal combustion engine cars altogether, and switch to all-electric vehicle production, from the end of 2022 as part of its new development strategy.

The National Assembly (NA) has also voted to pass a bill to amend nine laws, including regulations on fixing the excise tax rate on electric vehicle batteries with the goal of encouraging investment in the development of battery-powered electric cars, which would also contribute to reducing environmental pollution from vehicle emissions and reducing greenhouse gas emissions.

In which, the excise tax rate for electric vehicle batteries will be reduced by 3-12 percentage points compared to the current level in the first five years after the revised law takes effect, from March this year to February 2027.

The establishment of incentives to attract investment ahead of other Southeast Asian countries would provide significant chances for Vietnamese enterprises like VinFast to manufacture battery-electric vehicles for both domestic and international markets, according to the NA Standing Committee.

Also from March, three years of free registration fees shall be applied to electric cars purchased or acquired. For battery-run electric cars, within the same period of time, the first registration fee will be zero. Within the following two years, the fee will be half of that of fuel-run vehicles with the same number of seats.

During temporary regulations, buyers of cars with less than nine seats in Vietnam have been subject to a 10 per cent registration fee, and 12 per cent for residents of Hanoi.

Electric crossovers

VinFast’s new development strategy for all-electric vehicle production is a bold move, making it one of the world’s first automotive companies to completely switch to pure electricity.

Along with a commitment to becoming an all-electric carmaker, VinFast officially launched a range of fully-electric vehicles: the VF5, VF6, and VF7 models; and two models originally called VF e35 and VF e36 when introduced at the 2021 LA Auto Show, but which are now seemingly renamed VF8 and VF9, according to a recent press release.

Chairman of Vingroup Pham Nhat Vuong, who rarely discusses business in the press, gave an interview this month expressing his views over electric cars being the future. Now, he believes, is the decision-making moment for the world to choose electric cars over gas-fuelled vehicles.

“Of course, we have to ensure that our customers are not hurt by the decision, and even make sure that they receive more benefits,” Vuong said.

Other companies are following suit. Last year, Mercedes-Benz Vietnam added an electric vehicle section to its product list, accompanied with the words ‘Coming Soon’ for an EQS sedan. The Mercedes-Benz EQS is considered an electric variant of its S-Class.

Meanwhile, local assembler and distributor of Kia automobiles, Truong Hai Auto Corporation, will introduce the Kia EV6 electric crossover in the second quarter of 2022, with price and variants to be revealed soon.

Many countries around the world have created tax incentives for electric vehicles to promote sustainable development. In China, specifically, electric vehicles are classified in the category of the new energy vehicle industry. In addition, Belgium also exempted registration tax for electric vehicles in 2020.

Khuat Viet Hung, deputy chairman of the National Traffic Safety Committee, said that it is necessary to have a commitment, clear goals, and a specific roadmap to realise the potential of electric cars and green products in general in the Vietnamese market.

According to Hung, reducing the purchase price for users and building an infrastructure system are important factors for the development of such vehicles in Vietnam. Strategies such as reduction of excise and other taxes, a drop in road fees, and discounts on car battery chargers could be applied to reduce selling prices and operating costs, thereby encouraging more use.

Sharing the same viewpoint, Prof. Dr. Bui Quang Tuan, director of the Vietnam Institute of Economics said, “In order for electric cars to develop in Vietnam, it is necessary to have specific policies and solutions that are interconnected, inter-sectoral, and cooperative, acting on many fronts in order to support both manufacturers and users.”

Clear characteristics

In ASEAN, Thailand, Indonesia, and Malaysia have all expressed their ambitions for electric cars. With the target of becoming a global electric vehicle manufacturing base, Thailand is already offering many privileges to electric vehicle manufacturers, in addition to incentives for users.

For instance, the country offers a three-year tax exemption for plug-in hybrid vehicle manufacturers and a maximum eight-year corporate income tax exemption for battery electric vehicle manufacturers, subject to certain conditions. Manufacturers in the supply chain also enjoy incentives, as makers of related equipment and components will be exempt from corporate tax for 8 years.

In terms of infrastructure in Vietnam, VinFast has completed more than a quarter of the potential 2,000 charging stations in its phase 1 plan for Vietnam’s provinces and cities.

Currently, however, some of the largest car and motorbike manufacturers in Vietnam are remaining cautious about introducing electric products to the market due to the lack of charger systems and added incentives.

“Electric vehicles have specific characteristics in terms of charging stations and charging time, while currently, the infrastructure is not sufficient,” said one foreign carmaker at the Infrastructure for Electric Vehicles in Vietnam workshop last year. “In terms of production, Vietnam’s battery and electric motorcycle manufacturers have not met the world’s standards, leading to high prices and difficult access for consumers. Additionally, in terms of recovery and disposal, there is currently no maximum support.”

In response, Tran Quang Ha, deputy director of the Department of Science and Technology under the Ministry of Transport said, “We put out a plan for 2022 to develop battery standards. Investing and testing according to international standards is a very difficult issue because it involves technical factors such as vibration and the environment, but it must be done.”

Vietnam’s automobile industry aims to produce around one million cars of all types between now and 2030, with internal combustion engines remaining the most popular. Electric car development will accelerate between 2030 and 2040, with a production capacity of 3.5 million vehicles available, while the local automobile industry will have stable growth from 2040 to 2050, after which it will become saturated with a production capacity of about 4-4.5 million vehicles.