A.20 PASSENGER ELECTRIC MOBILITY IN VIETNAM

Vehicle fleet composition: Mixed fleet

Net oil trading status: Importer

Relative cost of vehicles: High

The dominant vehicle type in Vietnam is the two-wheeler (82.9 percent), followed by cars (9.1 percent), three-wheelers (6.2 percent), and buses (1.8 percent). Electricity is primarily generated from fossil fuels (63.6 percent)—mainly gas (33.4 percent) and coal (29.7 percent)—plus a significant contribution from renewable sources (36.4 percent)—almost exclusively hydro (36.1 percent).1 The government has targeted increasing the electric vehicle stock (a combination of hybrid and electric cars) to 6 million by 2020,2 from a low starting point of about 306,000.3 Vietnam is second only to China as a leader in electric two-wheelers, with an established high market share that reached 14 percent in 2020 (McKerracher 2021). VinFast, a part of Vietnam’s biggest private enterprise Vingroup, is spearheading domestic electric vehicle manufacturing. It plans to produce electric motorbikes, electric buses, and electric cars in their production plants in the country. VinFast is expecting to invest US$1.0–1.5 billion with a target to produce 100,000–200,000 vehicles per year, including five-seat sedans, SUVs and electric motorbikes (Pastoor 2018). The United Nations Environment Programme is supporting the introduction of electric two- and three-wheelers in Vietnam, along with some other Asian countries.4 GIZ has a major technical assistance program to support transport initiatives under Vietnam’s Nationally Determined Contribution. The program includes building mechanisms, policies, and road maps to advance e-mobility development at national and city levels.5 The World Bank Group is developing an e-mobility road map for the country and an operational plan for a pilot city (Cheung 2021).

Vietnam faces many conditions that are favorable toward electric mobility, including a mixed fleet and oil-importing status, but vehicle costs are relatively high (figure A.20.1a). Electrification of transportation looks to be viable as a national strategy (table A.20.1), with the exception of the four-wheel segment, because of significant (and unaffordable) capital cost differentials (table A.20.1). By contrast, there is a strong case for adoption of two-wheel electric motorbikes (figure A.20.1b), which present a life-cycle cost advantage of about 13 percent (almost 20 percent in financial terms). However, a significant barrier to uptake is the 50 percent capital cost differential associated with electric two-wheelers, which represents 8.7 percent of gross national income per capita and looks unaffordable even with consumer finance. Furthermore, electric buses also offer significant economic advantages on the order of 6 percent of life-cycle cost, against a capital cost differential of just over 10 percent.

The externality benefits of electric mobility in Vietnam are particularly significant for buses, in terms of both local air quality and savings in carbon emissions (figure A.20.1d).

Otherwise, fuel cost savings are the main advantage associated with electric mobility in Vietnam, given that gasoline is taxed at 60 percent and electricity is tax exempt (table A.20.3). Furthermore, electric buses and four-wheelers enjoy a tax differential of 45 percent. As a result, the overall case for electric mobility in Vietnam looks even better in financial than in economic terms (figure A.20.1c).

The total investment needs associated with the 30×30 scenario amount to US$3.8 billion per year by 2030 (or 0.85 percent of Vietnamese gross domestic product). About four-fifths of the required outlay is associated with the incremental capital of private electric vehicles, mainly two-wheelers (figure A.20.2a). In terms of public investment, the most significant item is the incremental capital cost of electric buses (figure A.20.2a). Given that implicit carbon prices associated with electric two-wheelers and buses in Vietnam are negative (table A.20.3), there is scope to cover 20 percent of incremental investments associated with these vehicle categories through carbon financing arrangements (figure A.20.2b). However, for four-wheel electric vehicles, the implicit carbon price is approaching US$700 per ton.

The overall economic case for electric mobility is very positive in Vietnam, even under more conservative assumptions about the cost of batteries (“scarce minerals” scenario) and the fuel efficiency of internal combustion engines (“fuel efficiency” scenario), and only improves with further decarbonization of the power sector (“green grid” scenario) (table A.20.2). On a positive note, the important advantage associated with electrification of buses is substantially increased through the more efficient procurement and operation of vehicles (“efficient bus” scenario). However, there is not yet any case for electrification of four-wheelers, even when it comes to taxi fleets and other intensively used vehicles (“taxi fleet” scenario). It is clear that electric mobility in Vietnam needs to prioritize the bus and two-wheel segments of the fleet, with efforts needed to reduce the capital cost.

Figures and tables start on the next page.

Note: Data in this figure represent the “business as usual” (BAU) scenario minus the 30×30 scenario (averages over fleet additions). The BAU scenario assumes that no policy target will be imposed for electric vehicles and that vehicle purchase decisions will continue to reflect historical trends. The 30×30 scenario assumes that sales of electric cars and buses will reach 30 percent, and of two- and three-wheelers, 70 percent, by 2030. 2W = two-wheeler; 4W = four-wheeler; CO2 = carbon dioxide; EV = electric vehicle; NOx = nitrogen oxides; PM10 = particulate matter less than 10 microns in diameter; SOx = sulfur oxides.