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Vietnam’s e-mobility sector needs more government attention

Vietnam’s mobility sector is beginning to gain momentum but will soon hit the buffers unless national charging infrastructure can emerge

Government support is required to help convince Vietnam’s consumers to embrace e-mobility solutions


POLICY VACUUM
The Vietnamese government is only just beginning to consider transport within its decarbonisation plans

SUPPLY AND DEMAND
An expanding e-mobility sector would help to solve the country’s renewables curtailment problem

KEY QUOTE
Vietnam can make significant headway in reducing emissions from the transport sector by mobilising international support and private sector participation


The Asia-Pacific region, home to some 60% of the world’s population, is grappling with not only how to rein in greenhouse gas (GHG) emissions but how climate change is already impacting several vulnerable countries in the region. Asian countries are on the front line of climate challenges since the area is home to 93 of the 100 most polluted cities on the planet, according to a recent McKinsey report. It also includes six of the top ten countries most affected by climate risks. Due to Asia’s population density and increasing economic growth, its transportation sector is now one of its largest sources of GHG emissions. The UN Economic and Social Commission for Asia and the Pacific (ESCAP) found that the region’s transport sector needs a big push toward decarbonisation”. With more developed Northeast Asian economies like Japan, China and South Korea pushing ahead with their own respective electric vehicle (EV) sector development to help reduce emissions, Southeast Asian nations are lagging behind. Thailand—which some analysts claim could become the region’s EV hub—along with Singapore, Indonesia and Malaysia, seem to have the most ambitious e-mobility development plans, but others, including Vietnam, where the transportation sector accounts for 18% of its total GHG emissions, risk being left behind.

STATE OF PLAY
With such a share, e-mobility plays an integral role in Vietnam’s efforts to meet its net zero 2050 goals. According to a World Bank report: If transport policy doesn’t integrate the climate factor, the combined effects of soaring emissions and extreme weather events would make it all but impossible for Vietnam to keep up the current pace of economic growth and social development,” it says. Vietnam can make significant headway in reducing GHG emissions from the transport sector: up to 9% (or 53 million tons in 2030) by mobilising international support and private sector participation,” the report adds. The World Bank advocates improving the fuel economy of vehicles, shifting road freight to waterborne transport and introducing EVs of various kinds, including motorbikes, cars and buses.

PACE OF CHANGE
If transport policy doesn’t integrate the climate factor, the combined effects of soaring emissions and extreme weather events would make it all but impossible for Vietnam to keep up the current pace of economic growth and social development


SMALL BASE
To date, however, rampant e-mobility development in Vietnam has not been possible for several reasons, including high automobile costs, lack of government support, no formal nationwide EV charging network plan and a lack of coordination between private stakeholders and national and provincial governments. Vietnam’s EV sector has been described as being in its infancy and with good reason. The number of EVs in the country, including hybrids, plug-in hybrids and pure electric, totalled just 219 units in 2019. This grew to 900 in 2020 with an additional 600 units sold during the first quarter of 2021, although most were still hybrid models, according to a US government report. Since the country re-opened at the start of 2022 after four months of strict Covid-19 lockdowns, EV sales have picked up. In June 2022, domestic car manufacturer VinFast sold some 2141 EVs. August sales were reportedly sluggish due to a lack of available components—an indication of future barriers to growth for the global market.

GROWING INTEREST
With the uptick in consumer interest, several more established automakers are primed to enter Vietnam’s fledgling EV sector, hoping to compete against VinFast, including KIA, Mercedes-Benz, Toyota, Tesla, Proterra, Nissan, BYD, Honda, Hyundai and Volvo. These companies have either introduced or are planning to develop new products in Vietnam in the near future. Yet, all are facing the same challenges in building out charging stations and apathy from the national government in Hanoi.Some domestic stakeholders nonetheless are trying to persuade the government to take more interest in Vietnam’s e-mobility potential, while promoting both environmental as well as economic benefits of e-mobility regulation. Vietnam is an emerging economy, which has advantages for the EV sector, including a good consumer market and a growing middle class and it helps the government has new climate goals announced at last year’s COP26 meeting,” said Trường Lăng, an analyst at Hanoi-based Viettonkin Consulting.

LACK OF NETWORK
Lăng points to a lack of charging networks as a major obstacle, however. The problem is exacerbated by Vietnam’s geography, he explains. Though the country’s width, from the east coast to its western border, is about 500 kilometres at its widest point and only about 50 kilometres at its narrowest. Its total length is around 1700 kilometres from north to south. This north-to-south dynamic requires a lot of charging stations,” Lăng says, But the current situation is not good at all, very few charging stations exist so far.” Simply put, if an EV owner wanted to drive across the mid-part of the country, there would be no problem, he explains, but for one driving north to south, it is impossible unless they own a hybrid vehicle. [VinFast is] pioneering more stations and trying to do a good job but they can’t build up the entire infrastructure when the state budget [for e-mobility] is insufficient,” Lăng adds. It’s very different from the US because many Vietnamese [still] aren’t familiar with EVs, so stakeholders need to agitate the market,” he says. VinFast, for its part, claims to have installed 500 EV charging stations in the country’s five largest cities by mid-2021, while highlighting plans for some 2121 additional charging station locations in 63 provinces, providing about 40,000 charging posts for autos and e-motorbike users across the country. Those numbers, however, are hard to verify. Vietnamese media has reported some EV charging stations being installed at a number of petrol stations in several cities in 2022, but the exact number of stations nationwide appears to be much less than the 2000-plus VinFast had earmarked by the end of this year. German automaker Porsche has also built a number of fast charging stations for its Taycan models in Hanoi and Ho Chi Minh City, while Mitsubishi is reportedly setting up charging stations for its new EV distributors.

PLANS AFOOT
To help remedy the ongoing problem, the Vietnam Automobile Manufacturers’ Association is talking with private stakeholders and the national government, Including the possibility of large Vietnamese manufacturers working with the government to develop a road map, both financial and technical,” Lăng says. The government is still, Keen on working with private stakeholders for pilot projects with tax incentives, including reducing the excise tax for infrastructure developers,” he explains. Vietnam’s two largest metro areas, Hanoi, the capital, and Ho Chi Minh City, the business hub, are currently planning city expansions over the next 10-20 years, including drafting new transportation policies. These plans could also be supported by the central government which would include the transportation sector and e-mobility incentives. In five years, things will be much different, a national digital strategy is also underway, and the government has ambitious plans to develop technology sectors, so digital transformation and [the emergence] of an e-government will help change things,” Lăng says.

WASTED POWER
Another obstacle facing Vietnam’s EV charging network ambitions is the country’s problem with grid curtailment. The issue first surfaced in early 2020 due to the country’s rampant development of solar power capacity, both residential and commercial, amid a then-generous government feed-in tariff for solar projects. In 2020, Vietnam became Southeast Asia’s largest solar power developer. Yet, grid curtailment problems have made it more difficult for many solar power projects to sell their offtake to state-run electricity distributor EVN. As such, a large number have had difficulty servicing the debt incurred to build their projects. The EV sector needs to work with EVN and its subsidiaries to find a solution to the amount of bureaucracy, according to Lăng. One of the challenges is EVN. When it has to sign PPAs with developers there are some restrictions, and even though EVN is under the government and Ministry of Industry (MIT), there are a lot of [bodies] they have to get approval from, including from the Prime Minister’s office.” Adding to the fray, Vietnam’s long-awaited Power Development Plan (PDP8), which was supposed to be released nearly two years ago, is still under review. Lăng however sees many of these hurdles as a positive development as the government is now aware of the existence of the e-mobility sector and is starting to take action with a pilot programme as well as putting regulations in place. It is also working with various stakeholders and learning from other governments in the region. The difficulty with e-mobility is that it can add to the grid constraints by increasing electricity demand. However, it could also be used to help solve some of the curtailment issues the country is facing.

EXPENSIVE OPTION
Elsewhere, Vietnam’s EV sector has to grapple with the country’s already high auto costs. According to the Vietnamese Ministry of Planning and Investment, prices for new autos in the country are two-to-three times higher than in neighbouring Thailand and Indonesia, while the gap is even wider compared with the US and Japan. The main reasons behind the inflated prices are high import taxes and fees paid to federal and local governments. This dynamic could benefit VinFast, since it is a domestic automaker and pays less in such taxes, but will remain an obstacle for foreign automakers keen on increasing their EV market share in the country.

TWO WHEELERS
While many automakers are keen to enter the market, cars are not the transport option of choice for many in Vietnam. London-based analysis firm BMI Research shows that Vietnam has the lowest automobile ownership rate in the region, with only 4-5% of families owning cars.

FIRST CHOICE
In 2020, there were over 65 million registered motorcycles in Vietnam, a country of nearly 100 million people


As its middle class grows in lockstep with its economy, car ownership will increase too but, according to most estimates, motorbikes will remain the popular choice for most buyers due to their lower cost and greater flexibility. In 2020, there were over 65 million registered motorcycles in Vietnam, a country of nearly 100 million people. As such, e-motorbikes are also growing in popularity, especially among younger urban professionals. E-motorbikes from foreign manufacturers were first introduced in Vietnam in 2018, along with models from VinFast, which has a 43.4% market share. Some three million e-motorbikes are on the road, with nearly one million sold annually. Still, for a country comprised mainly of motorbike owners, those numbers need to increase dramatically to help offset GHG emissions from the country’s transportation sector. Vietnam’s two-wheeler (motorbikes and mopeds) sales rank second in Southeast Asia and fourth in the world behind India, China, and Indonesia indicating just how much the e-mobility sector needs to expand. Vietnam has the potential to become an e-motorbike market leader if the government provides the right regulations and with stakeholder participation, an International Council on Clean Transportation (ICCT) report found. No word yet, however, if the Vietnamese government will show more interest in e-motorbikes than it does EVs. Government policies supporting the production and uptake of e-motorbikes and the development of charging infrastructure or battery swapping systems do not exist, the ICCT report adds.

PUBLIC TRANSPORT
E-buses, meanwhile, are also just starting to appear on the streets of Ho Chi Minh City, according to Vietnamese media reports. The pilot phase of the first e-bus service in the city was launched in March 2022. The service is reportedly connected with the public transport system of the southern metropolis. According to Trần Quang Lâm of the city’s Department of Transport, their goal is to develop a modern public transport network with e-bus routes in the busiest areas. In December 2021, Hanoi welcomed its first three e-buses, with a further six buses added in 2022. The Hanoi Transport Corporation is currently operating 83 bus routes and around 1100 vehicles. Some 225 of these vehicles are eligible to be replaced by e-buses from 2025,” according to the Vietnam News Agency. To deploy e-buses at a national level, the development of economic and technical norms for the sector is essential, a report by Changing Transport, a Germany-based think tank, says. As such, the NDC Transport Initiative in Asia (NDC-TIA) is currently supporting the People’s Committees of Hanoi and Ho Chi Minh City in those efforts.


TEXT Tim Daiss PHOTOS Tron Le, Unsplash & Georgios Domouchtsidis, Unsplash