Vietnamese enterprises are beginning to carve out a role in the railway supply chain, but their contributions remain fragmented and largely limited to smaller components. The journey towards self-sufficiency therefore remains in its early stages.

A report from the Ministry of Transport (now part of the Ministry of Construction) highlights the industry’s current standing. Vietnam Railways - the State-owned operator of the country’s railway network - manages 258 locomotives, of which a striking 96 per cent run on the 1,000 mm narrow-gauge while just 4 per cent are designed for the 1,435 mm standard-gauge, limiting compatibility with international rail standards.

Vietnam’s railway stock consists of 5,298 railcars, including 980 passenger cars and 4,318 freight cars. Aging infrastructure, however, remains a major concern. While 40 per cent of these railcars have been in use for less than 20 years, a staggering 55 per cent have been operating for over three decades. Passenger comfort is another issue, with only 24 per cent of cars equipped with air conditioning as most are older models that have been refurbished rather than fully modernized.

As Vietnam pushes forward with modernizing its transportation infrastructure, the railway industry stands at a pivotal moment in its transformation.

Untapped core capabilities

Since 2005, Vietnam Railways has placed domestic orders for 240 new passenger cars and 773 freight cars. However, actual demand continues to outstrip supply, particularly for specialized freight cars such as container wagons and covered freight cars, forcing transport companies to lease equipment from abroad.

Beyond the shortage of rolling stock, the railway industry also faces significant challenges in infrastructure materials. Vietnam can currently only produce pre-stressed concrete sleepers, while key components such as P43 and P50 rails, high-grade materials for urban rail and high-speed rail, and railway switches still rely entirely on imports. The inability to manufacture these domestically remains a significant constraint.

Though Vietnam’s steel industry has achieved notable success in international markets, the Vietnam Steel Association has noted that the country has yet to develop a specialized steel sector. Domestic manufacturers primarily focus on standard construction steel, while high-performance steel for railways requires advanced technology and substantial capital investment. The small market size further reduces economic viability, discouraging local production.

The reliance on imports extends beyond materials to railway signaling and information technology. While Vietnamese companies can manufacture basic components such as cables and batteries, high-tech systems remain entirely dependent on foreign suppliers. The only exception is the Viettel Group, which has developed some modern telecommunications equipment but has yet to make significant investments in railway signaling technology.

One of the key reasons behind this technological gap is the railway industry’s stringent safety, stability, and reliability requirements. Limited market demand also discourages businesses from investing, while most railway projects have focused on upgrading existing systems rather than adopting new technologies. Major initiatives such as the high-speed railway are only set to begin after 2030, reducing the immediate need for cutting-edge railway technology.

Another major hurdle is the lack of a comprehensive technical standards system for railway equipment in Vietnam. Without certified domestic testing and compliance agencies, high-tech railway products remain commercially unviable, reinforcing the sector’s dependence on imported technology.

Looking at the broader picture, despite its vast potential, Vietnam’s railway industry has yet to establish full control over its supply chain. As a result, most railway projects continue to rely on foreign contractors for design, construction, and equipment supply. This dependence not only increases costs but also presents long-term challenges in maintenance and operations. Unlocking the full potential of the railway sector will require bold investments, policy reforms, and a stronger role for domestic enterprises in the supply chain.

Lessons from elsewhere

According to Associate Professor Nguyen Chi Sang, Chairman of the Vietnam Association of Mechanical Enterprises (VAMI), mastering technology not only reduces investment costs but also strengthens domestic production, minimizes foreign dependence, and drives sustainable railway development.

China leads the world in high-speed rail, thanks to a strategic approach to technology acquisition. Over the past two decades, it has collaborated with major companies such as Kawasaki from Japan, Bombardier from Canada, Siemens from Germany, and Alstom from France. The government mandated technology transfer for foreign companies involved in domestic projects, enabling the country to achieve a localization rate of 90 per cent and become a global leader in railway exports.

In Europe, Poland pursued a similar approach through international partnerships. In 2011, the Warsaw Metro Company signed a €272 million ($297 million) contract with a Siemens-Newag joint venture for 35 trains. Malaysia also prioritized localization by requiring railway assembly within the country. In 2012, a €350 million ($378.3 million) contract for 58 metro trains stipulated local assembly.

Drawing from these lessons, Associate Professor Sang emphasized that Vietnam must develop a structured roadmap for the railway industry and remain committed to the goal of localization. First of all, it is essential to establish a standardized system for the railway sector as a foundation for modular domestic production. At the same time, Vietnam must clearly define which products and services should be localized at each stage and incorporate these requirements as prerequisites in bidding documents.

Additionally, the government should assign specific domestic enterprises to handle key components and apply a direct contracting mechanism for at least the first three projects. With a well-planned strategy, Vietnam can fully master railway technology and gradually advance in the field, following the successful paths of other countries.

Advancing technological independence

Forecasts indicate that rail infrastructure development by 2035, with a vision towards 2050, including both national and urban rail, will create a large-scale construction market valued at an estimated $76 billion, alongside a $34 billion equipment market. This demand for locomotives, railcars, signaling systems, and other essential equipment will drive domestic industry growth through localization.

As Vietnam’s private sector continues to expand, many domestic enterprises are now capable of integrating into global supply chains and providing industrial products and services. The scale of the rail sector presents a strategic opportunity for Vietnamese businesses to acquire and master modern technologies, ultimately achieving self-sufficiency in production.

According to research by the Transport Development & Strategy Institute, Vietnam can achieve full self-reliance in rail infrastructure construction, reaching approximately 41 per cent of total investment, similar to its success in bridge, tunnel, and expressway projects.

Beyond construction, with the right policy support, Vietnam could gradually localize key segments such as railcar manufacturing, traction power systems, and signaling technology, while ensuring autonomy in operations, maintenance, and high-speed rail component production. This progress is not only critical for modernizing transportation but also serves as a catalyst for the domestic rail and support industries.

To realize this goal, the government issued Resolution No. 178/NQ-CP on October 31, 2023, designating the rail industry as a priority sector for industrial development.

Lessons from developed countries show that mastering rail technology requires a structured roadmap alongside advancements in support industries such as metallurgy, mechanical engineering, and automation. However, the most crucial factor remains a sufficiently large market to sustain technology transfer and development.

Experts largely agree that with favorable market conditions and strong policy backing, Vietnam would be able to establish a self-sufficient rail infrastructure industry, localize production, and elevate the rail sector as a key pillar of the national economy.