Manufacturing News 24/05/2024, 11:14

Vietnam in Need of 12.3 Billion USD for Electric Vehicle Infrastructure

According to the HSBC Global Research, just installing enough charging infrastructure and renewable energy capacity for new electric vehicles will require about 12.3 billion USD in the period 2024-2040.

Vietnam in Need of 12.3 Billion USD for Electric Vehicle Infrastructure

The report 'Vietnam At A Glance: The Electric Vehicle Story' recently published by HSBC Global Research, states that in recent years, energy transition has become a focus in Asia, and Vietnam is no exception.

According to HSBC, the development of electric vehicles is contributing to the goal of balancing carbon emissions and promoting resources for long-term sustainable economic development in Vietnam. Domestic electric vehicle manufacturers have somewhat succeeded in developing electric motorcycles.

Today, Vietnam's electric motorcycle market is the largest in ASEAN and the second-largest in the world, only after China. In the future, Vietnam's electric vehicle market still has a lot of room to continue growing.

Accordingly, HSBC estimates that Vietnam's total annual sales of electric motorcycles and cars could increase from under one million in 2024 to over 2.5 million in 2036. 

The report suggests that electric motorcycles will lead the way in Vietnam’s electric vehicle development. The advantage of electric motorcycles over electric cars is that they are affordable, have a higher degree of component similarity, and have a high domestic production rate. However, by the end of the 2030s, HSBC Global Research believes that electric motorcycle sales will flatten in Vietnam as the domestic motorcycle market will be saturated.

Meanwhile, Vietnam's electric car market has great potential that has not been exploited, given that more than 60% of the population owned motorcycles in 2020, while only 5.7% owned cars (according to the International Trade Administration, US Department of Commerce, July 22, 2022).

“Many people in this industry are confident that Vietnam can fully exploit its electric car potential. For example, the Vietnam Automobile Manufacturers Association predicts that by 2040, Vietnam will have 3.5 million electric cars on the road," HSBC's report stated.

To replicate the successful model of electric motorcycle in the electric car segment, it is first necessary to resolve a few obstacles to the popularization of electric vehicles, possibly through state support policies. For example, Vietnam has implemented a registration fee exemption for battery-powered electric cars, a reduced import tax on battery-powered electric cars, and an exempted corporate income tax for investment projects in battery-powered electric cars.

HSBC Global Research believes that infrastructure investment is key to overcoming the barriers to the popularization of electric cars in Vietnam. Experts estimate that just installing enough charging infrastructure and renewable energy capacity for the predicted number of new electric vehicles will require about 12.3 billion USD and 14 tWh of cumulative energy in the period 2024-2040.

In addition, Vietnam can upgrade its domestic electric vehicle ecosystem by leveraging its abundant rare earth reserves, which are the second largest in the world, surpassed only by China. Although rare earths are not as common as lithium, which plays an important role in the electric vehicle battery supply chain, these 17 rare earth elements are still very important for the electric vehicle manufacturing industry. In particular, neodymium and samarium are often used in motor magnets.

In early April, Chery Automobile announced that it would be the first Chinese company to build an electric vehicle factory in Vietnam. The 800 million USD factory, in a joint venture with Vietnam's Geleximco Group in Thai Binh province, will have a production capacity of 200,000 vehicles per year after completion in Q1/2026. 

Increased investment from China could enhance manufacturing cooperation with neighboring Thailand. Notably, BYD is constructing a 504 million USD factory there to export electric vehicles to Vietnam, with a 0% import tax applicable to all ASEAN economies.

"If we take advantage of cooperative relationships with China and overcome barriers to popularizing electric vehicles both domestically and abroad, we believe that Vietnam has the potential to accelerate past ASEAN neighbors in the race to green transportation,"  HSBC experts commented.

VietNam Finance / Translator: Hoàng Trúc
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