Vietnam’s electric vehicle (EV) market has recently witnessed unprecedented vibrancy and is poised for strong growth in the years ahead. In a significant policy move, Prime Minister Pham Minh Chinh issued Directive No. 20/CT-TTg in mid-July, setting clear milestones for phasing out fossil fuel vehicles in Hanoi. Starting from July 1, 2026, motorcycles powered by gasoline or diesel will be banned from operating within Ring Road 1, and from January 1, 2028, privately-owned gasoline and diesel-powered motor cars will also face restrictions within both Ring Road 1 and Ring Road 2. By 2030, these measures will be expanded to cover the entire area within Ring Road 3.

Market heating up

The increased adoption of EVs and the gradual phasing out of fossil fuel-powered vehicles in Hanoi are seen as urgent solutions to tackle environmental pollution, particularly air pollution caused by emissions from such vehicles. According to data from IQAir’s monitoring system, air quality in the capital has remained at alarming levels, frequently ranking it among the most polluted cities in the world and underscoring the critical need to accelerate the shift towards green transportation.

Following Hanoi, Ho Chi Minh City is also taking bold steps. The southern city is planning to replace around 400,000 gasoline-powered motorcycles with electric alternatives through a four-phase roadmap starting in 2026. These decisive and forward-looking initiatives not only aim to improve living conditions but also provide a significant boost to the domestic EV market. This transition presents a major opportunity for local EV manufacturers to ramp up investment, scale their operations, and strengthen their position in a market poised for rapid acceleration.

According to a market research report from Mordor Intelligence, Vietnam’s EV market is currently valued at $3.12 billion and is expected to reach $7.41 billion by 2030. This translates to an impressive compound annual growth rate (CAGR) of 18.88 per cent during the 2025-2030 period. As major urban centers like Hanoi and Ho Chi Minh City accelerate the transition from gasoline-powered vehicles to EVs, the outlook becomes even more promising.

Notably, Vietnam’s EV market recently witnessed a significant turning point with the entry of Honda - one of the major global players in gasoline-powered vehicle manufacturing - into the EV space in mid-July. Honda’s official foray into the market underscores both its immense potential and attractiveness and promises to usher in a new wave of competition alongside already active brands such as VinFast, Toyota, Hyundai, PEGA, Dat Bike, Dibao, BYD, and others.

The market’s dynamism is not only reflected in corporate expansion strategies but is also evident in the surge in sales figures. According to the Ministry of Construction (MoC), EV sales in Vietnam have grown dramatically over the past three years: from around 8,000 units in 2022 to 37,800 in 2023 and nearly 90,000 in 2024, representing a 2.5-fold increase over the previous year.

The market’s medium-term outlook is further strengthened by several favorable factors, including growing demand for fuel-efficient, high-performance, and low-emission vehicles; declining battery costs; and increasingly stringent emissions regulations, all of which are driving sustainable growth in Vietnam’s EV industry.

On the policy front, the Vietnamese Government has rolled out a range of supportive measures to boost EV adoption. According to Ms. Chiara Rogate, Senior Energy Specialist at the World Bank (WB), Vietnam has been promoting initiatives such as exemptions from registration fees, a reduction of the special consumption tax on EVs from 2022 to 2027, and support for charging infrastructure development. These are seen as crucial foundations for propelling the EV market forward in the years ahead.

Another key factor contributing to the market’s momentum is rapidly-shifting consumer thinking. “Vietnamese consumers are increasingly drawn to EVs due to their lower operating costs compared to gasoline vehicles, as well as growing awareness about eco-friendly living and environmental protection,” Ms. Rogate emphasized.

Benefits from changing

The transition to EVs is not only an urgent environmental necessity but also presents significant economic opportunities for Vietnam in the years to come. The “Electrifying Journeys: E-mobility Transition in Vietnam” report from the WB estimates that this transition could generate up to 6.5 million new jobs by 2050, with the charging station segment alone accounting for 61 per cent of total employment across the EV value chain.

To achieve Vietnam’s EV adoption targets, annual sales must increase to approximately 1.5 million by 2030 and 7.3 million by 2050. This translates into a cumulative market demand of over 7 million EVs of all types between 2024 and 2030 and 71 million between 2031 and 2050. Such robust growth will not only drive the domestic EV manufacturing industry but also spur high demand for charging infrastructure, maintenance services, battery recycling, and other supporting sectors within the EV ecosystem.

In response, many EV companies have begun launching a variety of incentive programs to encourage consumers to adopt environmentally-friendly vehicles. One notable example is Vingroup’s swift move following the Prime Minister’s directive, rolling out an attractive policy for customers in Hanoi that includes covering full registration fees for VinFast electric motorbike buyers who hold permanent or temporary residence in the capital. It has also partnered with several banks to provide low-interest installment loans, making EVs more financially-accessible to the public.

At the same time, Hanoi is proactively building a supportive ecosystem for EVs. In its draft policy, the Hanoi Department of Construction recently proposed direct cash subsidies for residents currently using gasoline or diesel-powered motorbikes, to encourage them to switch to EVs. The city also aims for at least 10 per cent of parking spaces in existing buildings and 30 per cent in new developments to be equipped with EV chargers by the end of 2026. Moreover, the installation of chargers on sidewalks will be prioritized, and investments in hydrogen and other clean fuel stations will be actively encouraged.

A notable highlight of Hanoi’s infrastructure development strategy is the strong push for public-private partnership (PPP) models in clean energy transportation projects. Investors participating in these projects will benefit from special incentives, such as priority access to land in planned zones and full exemptions from land rental fees until the end of 2033.

However, to ensure the EV transition is effective and sustainable, thereby promoting the development of Vietnam’s EV market, the country must implement comprehensive support measures for its citizens, especially vulnerable groups. According to Mr. Nguyen Dong Phong, Director of the National Motor Vehicle Emission Test Center (NETC), replacing gasoline motorbikes with EVs will have significant social and economic implications. Therefore, targeted and practical support policies are essential to ensure that the majority of people can access EVs.

Mr. Phong also emphasized two critical challenges that must be addressed: the development of a widespread and reliable charging station network, and ensuring a stable electricity supply. Moreover, Vietnam must establish a long-term strategy for battery waste management. “We need to address battery disposal thoroughly, including recycling, reuse, and minimizing landfill, so that the EV transition is not only clean at the tailpipe but also sustainable across the entire product life cycle,” he stressed.