Timing right for ambitious electric vehicle takeover

Vietnam is powering ahead in trying to reach its electric vehicle infrastructure targets, Photo: Le Toan

Vingroup, the largest private conglomerate in Vietnam, is set to build a $387 million battery cell factory for its electric vehicle (EV) unit VinFast in the central province of Ha Tinh. The new battery plant, with an annual full capacity of 5 gigawatt-hours (GWh), will be constructed on a 12.6-hectare plot, according to provincial authorities.

The plant is expected to start production with an annual capacity of 3GWh after hardware and software are put in place by the third quarter of 2022, and is expected to be operating at full capacity by 2025.

The move is just the latest in a series of bold actions for VinFast, which unveiled its EVs in 2019 with a view to bringing low-cost Made-in-Vietnam green vehicles to the wider world.

According to VinFast, it will officially launch two smart EV models globally in March next year. These are being called breakthrough electric SUVs with impressive exterior designs and top-of-the-range convenience, meeting the highest international safety standards. Both models will feature advanced driver assistance and infotainment systems developed by VinFast and its partners.

“The fact that European and North American governments have announced roadmaps to ban internal combustion engine cars and switch to electric vehicles is a perfect opportunity for VinFast to conquer the global market,” stated Thai Thi Thanh Hai, CEO of VinFast Global. “We are confident that VinFast will be positively welcomed around the world thanks to high quality, a flexible and innovative sales policy, and high-class aftersales services.”

In terms of personnel, as well as a core of Vietnamese senior managers, VinFast has also recruited automotive and business experts from leading carmakers like Tesla, BMW, Porsche, Toyota, and Nissan. Together, they have developed the organisation and expanded partner networks to prepare for market entry.

VinFast this year officially kickstarted its branches in the United States, Canada, France, Germany, and the Netherlands in preparation for launch in those markets, moving closer towards the goal of becoming a global smart electric car company.

In terms of infrastructure, the manufacturer has also completed more than a quarter of the potential 2,000 charging stations in the plan of phase 1 in Vietnam’s 63 cities and provinces. It still hopes to complete the charging station target by the end of this year.

Infrastructure requirements

Other car companies operating in Vietnam boast EV products and have plans to develop additional charging stations, with Central Power Corporation also successfully producing EV charging stations.

However, Pham Thi Thuy Duong, director of the Centre for Charging Stations at VinFast, said that VinFast’s charging station is fully compliant with international standards, and can theoretically charge all compatible vehicles.

“In the first phase, we just tested the safety of VinFast cars, so we only temporarily provided VinFast cars. In the future, when other car models enter the market, I hope that many others will invest in charging stations and can share them,” she explained, while insisting that Vietnam has a golden opportunity to develop the EV industry as the country has a lot of potential for developing clean energy sources like wind and solar power.

Currently, sales of two-wheeled electric vehicles in Vietnam have hit about 500,000 units per year with an annual growth rate of around 30 per cent. The market was mainly imported previously, but the number of locally-assembled two-wheeled EVs has increased sharply from the end of 2018 with the participation of VinFast. Although the market in Vietnam is only in its infancy, there is still a lot of potential in the development of EVs, according to the Ministry of Industry and Trade (MoIT).

Nevertheless, currently some of the largest car and motorbike manufacturers in Vietnam, such as Honda, are remaining cautious in introducing electric products to the market due to the lack of charger systems and incentives.

“EVs have specific characteristics in terms of charging stations, while currently the infrastructure is not sufficient,” explained a representative of Honda Vietnam. “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.”

Deputy Minister of Transport Le Dinh Tho has admitted that EVs are considered one solution to save energy and reduce air pollution, with many countries launching plans to convert fossil fuel vehicles into the era of green, electric, and even self-driving cars.

“Vietnam currently has one million electric motorbikes and thousands of electric cars will be handed over by the end of this year,” Tho said. “Meanwhile, a number of enterprises that manufacture and import cars and motorcycles in Vietnam have started testing, manufacturing, and launching environmentally-friendly vehicles such as hybrids and electric motorcycles.”

Urgent need for incentives

Tho added that with a population of nearly 100 million people, the number of EVs is still very limited. Therefore, it is necessary to raise the issue of state management through sets of standards and regulations and to develop management regulations, mechanisms, and policies to develop EVs.

Pham Tuan Anh, deputy director of the Industry Agency under the MoIT, said that there are many factors affecting the development of the industry in Vietnam right now, with the top barriers being low average incomes and the lack of preferential policies.

“The development of the EV industry needs to integrate and utilise the existing capacity of automobile manufacturers. This development must be consistent with current transport infrastructure plans and infrastructure for EVs such as electric charging stations,” he added.

In order to develop EVs, the MoIT has proposed to the Ministry of Finance (MoF) that it is necessary to attract more foreign-invested projects and investors with taxes, fees, and environmental policies. “At the same time, Vietnam must build supporting industries to serve such projects that can invest in producing EVs,” Tuan Anh said.

Meanwhile, the Vietnam Automobile Manufacturers Association (VAMA) proposed that the government encourages consumer demand by granting a special consumption tax for the development of EVs in order to make the nation’s goals a reality. It has requested that the government reduce registration rates for hybrid electric cars by 50 per cent, plug-in hybrid EVs by 70 per cent, and battery-powered EVs by 100 per cent. Moreover, financial assistance for parking fees and environmental levies is required, and charging station infrastructure installation must fulfil certain specifications, according to VAMA.

Vietnam’s automobile industry aims to produce around one million cars of all types between 2021 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.

In terms of the environment, Truong Ba Tuan, deputy director of the MoF’s Tax Policy Department, said that the country shall implement appropriate tax policies to encourage the production and use of environmentally-friendly vehicles in order to meet emission reduction targets.

“Policies promoting production of eco-friendly cars and EVs in the country should be consistent with promoting the overall development of the automobile industry,” Tuan said. “It is especially important to align the promotion of them with the policy of developing other strategic car lines identified in the long-term development orientation. An appropriate transition from the production of automobiles powered by fossil fuels is required.”

In 2007, when researching and developing a proposal to amend the excise tax policy, the integration of environmental protection objectives into the Law on Special Consumption Tax was set out for the first time. Through the current adjustments, the excise tax rate for electric cars is deemed quite low, ranging from 1-15 per cent depending on the number of seats. The difference for cars powered by fossil fuels ranges from 10-150 per cent depending on the number of seats and capacity.