Electric vehicle subsidies underpin green transport shift

Different initiatives for subsidising electric vehicle (EV) sales are expected to promote the shift to green transportation in Vietnam.

The Ministry of Transport (MoT) is collecting feedback on its proposed policy of offering a $1,000 subsidy to electric car buyers. If approved, this policy is expected to change customer behaviour towards EVs, thereby contributing to the growth of the EV sector and the adoption of green energy in Vietnam.

The 2023 Deloitte Global Automotive Consumer Study also pointed out that the shift to EVs is primarily based on a strong consumer perception that will significantly reduce vehicle operating costs.

In Vietnam, low fuel costs are the top reason for customers to choose an EV as their next vehicle. Meanwhile, government incentives, subsidies, and stimulus programmes are ranked sixth out of the nine top reasons to buy EVs.

According to the MoT, as of the end of July 2023, about 20,065 EVs were in operation in the country. The majority were locally produced and assembled.

Meanwhile, the Vietnam Automobile Manufacturers Association (VAMA) forecasts that Vietnam will reach one million EVs by around 2028 and about 3.5 million EVs by 2040.

While this may sound ambitious, considering Vietnam only accounts for 0.7 per cent of total EV sales in Southeast Asia (Statista Q3/2022), new government policies and incentives are expected to further promote the use of EVs among Vietnamese consumers.

The proposed EV subsidy of $1,000 has recently been rejected by the Ministry of Finance, saying that MoT’s suggestion is not suitable at the moment. Accordingly, the state budget is prioritised to poor people and people in remote areas rather than EV buyers, most of whom are wealthy.

The MoT continues to seek feedback from other ministries, the VAMA, and five local car manufacturing and assembling firms on the policy for the second time.

It is clear that the government is taking the first steps to promote Vietnam’s EV industry. More companies have taken measures to support EV buyers accordingly.

Digital bank Cake by VPBank has recently announced a partnership with VinFast to offer e-bike purchase loans starting at zero interest. The tie-up is expected to promote comprehensive digital services, popularise EVs, and foster environmental protection.

Ho Thanh Huong, CEO of VinFast Vietnam said, “The partnership agreement gives customers the opportunity to own and use smart, modern, and environmentally friendly e-bikes at optimal cost through simple and convenient procedures.

This partnership offers customers access to a safe and civilised transportation alternative, contributing directly to the government’s net-zero carbon emission target by 2050.”

The handshake between the large-scale EV manufacturer and the digital financial platform is expected to bring benefits to customers on both sides. While Cake will expand its digital financial product line to include vehicle instalment payment services, VinFast offers customers the ‘Buy Now, Pay Later’ payment experience in a quick, convenient, and secure way.

Furthermore, this is also an opportunity to promote digital financial inclusion. Specifically, Cake by VPBank boasts a large and diverse digital ecosystem, while VinFast owns a nationwide distribution network with a diverse line-up of two-wheeler and four-wheeler models.

“Going forward, Cake by VPBank will keep working with VinFast to research different financing packages tailored for customers looking to acquire electric vehicles across several channels. We are in the discussion to develop more diverse products to bring practical benefits to customers, thereby contributing to promoting comprehensive digital finance and green energy in Vietnam,” Nguyen Huu Quang, CEO of Cake, said.

According to the Ministry of Industry and Trade, e-bike sales in Vietnam have increased by about 30-35 per cent recently, making the country the largest market for e-bikes in ASEAN and the second largest in the world, just behind China.

There is ample potential for electric vehicles, including e-bikes and electric cars, given that the world is significantly promoting the green transformation in transport and other fields.

Vietnam Investment Review