Electric vehicles are seeing positive signs on the road to market expansion in Vietnam, but there remain obstacles that must be traversed in order to move ahead.

Legal roadblocks

Considerable progress in electric vehicle (EV) manufacturing and record global sales is spreading to Vietnam. EVs have proven to be a core trend, following a fierce race between international automakers in their launches. This was clearly evident at the recent 45th Tokyo Motor Show, which took place in Japan in early November.

Nguyen Tran Duy Kha, director of Ho Chi Minh City-based Electric Car World Co., Ltd. (ECW), is busying himself by outlining an appropriate strategic business plan in the face of strict regulations.

“ECW’s annual sales reached 500 units, most of them with less than 16 seats and without doors, sold to tourism companies, hotels, and households engaged in tourism services. Now EVs are more accepted, and many locals came to our showroom in search of EVs for private use or service,” Kha told VIR.

He said that EV sales experienced robust growth and increased competitiveness during the past two years. EV imports to Vietnam are facing stringent regulations as stipulated in the government’s recent Decree 116, which requires the building of workshops or service centres for imported EVs.

Besides import duties, EVs shipped to Vietnam are subject to special consumption tax rates ranging from 15-70%, thus forcing the prices up 15-20%, Kha said. He is considering possibilities for expanding the business of completely built-up EVs including commercial and passenger types or importing components and equipment for local assembly.

Vietnam lacks a comprehensive e-vehicle development strategy. Elements aimed to stimulate the manufacturing and use of e-vehicles are scattered in numerous legal documents, including the National Automobile Development Strategy by 2025 and tax change decrees.

In recent proposals announced to collect public opinions, the Ministry of Finance suggested cutting tariffs levied on e-cars with less than nine seats to 50% from the current 70%, serving to boost the local e-vehicle market.

EVs will be immune from tariffs in 2018 under free trade agreements (FTAs) in which Vietnam is a signatory, such as the ASEAN Trade in Goods Agreement (ATIGA), the ASEAN-Republic of Korea FTA, and the agreement between ASEAN and China. They will be levied at 4% under the ASEAN-Japan FTA. Tesla cars from the US will be taxed at 70% under most-favoured-nation (MFN) treatment.

Tax cuts for EVs should be added to the country’s e-vehicle development strategy in line with international practices, showing Vietnam’s attempts to realise international and regional trade commitments, according to economic expert Ngo Tri Long.

Leading the charge

In Vietnam, the Vinfast automobile company is the first domestically-invested company to commit to automobile manufacturing, including EVs. Recent cooperative deals in technology and production between the auto firm and global firms such as Bosch and Siemens are driving the former closer to its targets.

Though no electric car charging stations are installed in Vietnam, at least two auto firms-which are members of the Vietnam Automobile Manufacturer Association (VAMA)-are conducting research to bring e-cars to Vietnam. All they are waiting for is the green light from the government, said VAMA.

Mitsubishi Vietnam plans to introduce EVs to the local market in a long-term strategy, but Vietnam’s existing policies are disadvantageous to EVs. Governments of foreign countries such as Japan often offer price subsidies on “green” vehicles, but in Vietnam, there are neither tax incentives nor price subsidies for EVs, a Mitsubishi Vietnam source told VIR.

Tran Viet Ngai, chairman of the Vietnam Energy Association, told VIR, “It is not difficult to develop electric car charging stations, but it all depends on how much we can invest.”

“Recent technology breakthroughs in EV manufacturing now allow customers to drive up to 100 kilometres per hour for 300-400 kilometres.”

Ngai added that EVs are easily receptive in both urban routes and long distance stretches thanks to their longer battery lives, noiseless engines, and low carbon dioxide emissions.

EV development needs a blueprint for installing urban and interprovincial charging stations, based on an in-depth analysis of e-vehicle density and flow, he said.

In 2016, Vietnam reportedly spent nearly US$500,000 on purchasing EVs from overseas markets, including Japan, China and the US.

VIR