The Evolution of Vietnam’s Automotive Industry: Rapid Growth, but Challenges Remain

With surging domestic sales, a shift towards green vehicles, and attracting international investment, Vietnam is steadily making its mark on the global automotive map. However, to ascend to the position of a regional automotive hub, Vietnam must overcome technological barriers, localize production, and implement long-term policies.

Vietnam’s Breakthrough in ASEAN

Statistics reveal that in the first half of 2025, automobile consumption in Vietnam surged by 20% compared to the same period in 2024. The Vietnamese market is witnessing a strong recovery in purchasing power, especially in the urban SUV, electric vehicle, and hybrid segments.

This growth stems not only from increased demand post-pandemic and inflation but also from tax incentives, favorable credit policies, and the deepening involvement of domestic and international joint venture companies.

Three Pillars for Development

The robust growth of Vietnam’s automotive industry in 2025 is propelled by a combination of intrinsic factors, including rebounding consumer demand, the leading role of domestic enterprises, and open trade policies.

Firstly, domestic consumer demand is experiencing a noticeable recovery after the pandemic-induced slowdown. A young population, rising average income, and a shift towards personal transportation have provided a significant boost to the market. According to data from the Vietnam Automobile Manufacturers’ Association (VAMA), nearly 32,000 vehicles were sold in June 2025 alone, the highest monthly figure for the year so far, indicating a positive resurgence in purchasing power.

Additionally, VinFast continues to spearhead the industry as the only Vietnamese automotive company with a comprehensive ecosystem encompassing electric vehicles, batteries, charging stations, and an extensive network for sales and after-sales services. In June 2025, the company delivered 11,382 electric vehicles and expanded its export activities to strategic markets such as Indonesia, India, and the Middle East. With its rapid growth, large-scale operations, and global integration, VinFast is becoming the “national representative” in the endeavor to introduce Vietnamese automobiles to the world.

It is also worth mentioning the increasingly open integration policies of the government. The reduction of import taxes on automobiles from the United States, along with the roadmap for deeper involvement in new-generation trade agreements, is attracting high-quality FDI into the automotive industry. Simultaneously, supportive policies for the development of ancillary industries and efforts to enhance localization are laying the foundation for domestically produced vehicles to compete on equal footing with imported ones in the near future.

Challenges and Bottlenecks

Despite the achievements made in recent years, the Vietnamese automotive industry has not yet achieved a breakthrough to become the regional production hub, hindered by long-standing bottlenecks.

The most significant challenge is the low localization rate. Assembled vehicles in Vietnam still heavily rely on imported components from Thailand, China, and South Korea. Crucial components such as engines and transmissions, which determine technological mastery and value, are not yet produced domestically.

Additionally, the core technological foundation in the automotive industry in Vietnam is virtually non-existent. Local enterprises have not yet mastered key technologies such as semiconductor chips, control software, solid-state batteries, or hybrid powertrains, which are becoming increasingly important in the global trend towards vehicle electrification.

The ecosystem of ancillary industries is fragmented and scattered. Domestic enterprises mostly produce simple components like car bodies, seats, and wiring. The number of Tier-1 suppliers that meet international standards and can participate in the global supply chain remains limited.

Furthermore, there is increasing competitive pressure from imported vehicles. The reduction of import taxes from the US and FTA countries is making it challenging for locally assembled vehicles, especially as they have not yet established a clear advantage in terms of cost, quality, or technology.

New Position in the Global Supply Chain

While no global automotive manufacturer has chosen Vietnam as their R&D hub, the country is becoming an attractive destination in the supply chain for auto parts and electric vehicles.

Currently, major corporations like Foxconn, Hyundai Mobis, and LG Energy Solution have invested in component and EV battery factories in Bac Giang, Hai Phong, and Vung Tau.

Chinese automotive brands such as Chery, Wuling, and BYD are approaching the Vietnamese market not only for distribution but also to seek local assembly partners for exports within the ASEAN bloc.

These developments indicate Vietnam’s potential to become a “satellite workshop” serving the Asia-Pacific markets, akin to Thailand’s role a decade ago.

Vision 2030: The Need for a Strong Impetus

To realize the aspiration of becoming a regional hub for automotive production and consumption, Vietnam needs to implement comprehensive solutions:

Accelerate the transition to electric vehicles, especially in the commercial and bus segments, where Vietnam can establish a competitive advantage.

Develop specialized automotive and electric vehicle industrial clusters in key economic regions such as Bac Ninh, Quang Ninh, and Can Tho.

Attract global automakers to invest in R&D in Vietnam through tax, land, and infrastructure incentives.

Upgrade the ancillary industries: Support Vietnamese enterprises in enhancing their production quality to participate in the global supply chain.

The Vietnamese automotive industry is in a “golden period” for a breakthrough. Robust consumer growth, the rise of VinFast, and a new wave of investments underscore its potential. 

However, for the dream of becoming Southeast Asia’s automotive manufacturing center to become a reality, Vietnam must take more decisive actions in technological reforms, policy improvements, and a comprehensive upgrade of the supply chain.

TH (Tuoitrethudo)