KEY INFORMATION

Vietnam’s electric vehicle (EV) support policies continue to be extended, primarily through the renewal of existing incentives, notably the special consumption tax and registration fee exemptions. The preferential tax timeline for EVs has been prolonged to end-2030, compared with the previous deadline of February 2027, helping stabilize total cost of ownership amid still-elevated EV prices.

At the same time, the plan to restrict and eventually ban fossil fuel-powered vehicles in central Hanoi signals a clearer regulatory direction toward transport electrification.

In practice, this trend has begun to materialize in market dynamics. 1Q2026 saw a notable increase in EV volumes and market presence, indicating that the transition from internal combustion engine (ICE) vehicles to EVs is gradually taking shape. Policy and market factors are increasingly aligned, sustaining momentum for vehicle electrification in the current phase.

OUTLOOK

The automotive sector outlook for 2026 remains heavily policy-driven, with extended tax incentives and registration fee support alongside a gradual tightening of restrictions on fossil fuel vehicles. These measures are expected to maintain affordability and accelerate demand migration toward EVs, particularly in major urban centers. As a result, domestic auto market electrification is likely to become more pronounced in the near term.

Against this backdrop, VinFast is likely to retain its leadership in the EV segment, supported by robust volume growth. However, financial performance remains a key concern, as the company continues to post losses due to heavy investment and expansion costs. While localization rates have improved, they remain suboptimal. This suggests that the EV transition is still in its early stages, reliant on policy support and yet to fully demonstrate operational sustainability.

In contrast, internal combustion engine (ICE) players are facing increasing growth pressure and are being forced to adapt. Haxaco is shifting toward EV distribution, while VEAM is approaching the transition indirectly via the supporting industries segment.

Overall,  2026 is likely to represent a “pivot year”, where policy continues to play a leading role while the market begins to exhibit a clearer electrification trend.