Vietnam lags in auto localization despite 3 decades of foreign investment: experts

Speaking at the seminar hosted by the Vietnam Government Portal, Nguyen Van Hoi, head of the Vietnam Institute of Strategy and Policy for Industry and Trade (VIOIT) under the Ministry of Industry and Trade, said the country has failed to meet localization targets set for the sector.

Vietnam began investing significantly in its automobile industry in the early 1990s, specifically after a government decree was promulgated in 1991 to develop the sector following the Doi Moi (Renovation) policy.

“The goal was to reach 40-percent localization by 2020, but we are currently only at around 10 percent,” Hoi said.

He added that while the government has offered foreign automakers a wide range of incentives — including land, tax breaks, and preferential loans — the level of technology transfer and domestic content remains low.

Vietnam, with a population of more than 100 million, reported total vehicle sales of 580,000 units in 2024, including both imports and locally-assembled vehicles.

However, imports remain high, accounting for 172,000 units last year.

In contrast, Thailand, with a population of around 70 million, produces two million vehicles annually and exports about half.

Hoi said Vietnam needs a clearer strategy to meet domestic demand, with a target of reaching between 900,000 and one million vehicles per year — including passenger cars, buses, commercial and specialized vehicles — by 2030 or 2035.

Ngo Nhat Thai, an automotive industry expert, attributed the low localization rate to insufficient production volumes.

“Although Vietnam houses several global car brands and a variety of models, annual output remains far below that of major manufacturing countries, making localization economically difficult,” he said.

Thai noted that many global automakers, such as Toyota and Ford, already have established international supply chains, making it difficult for Vietnamese firms to join their ecosystems.

He also criticized Vietnam’s current tax incentive structure, which focuses primarily on body shell components.

“This has led to investment clustering around a narrow group of parts, while key components like engines, transmissions, and electronic systems are still almost entirely imported,” he said.

Hoang Van Cuong, a National Assembly deputy, said the government’s localization policy was well-intentioned but lacked effective enforcement tools.

“We focus heavily on tax incentives and protection, but there are no binding commitments or timelines for localization,” Cuong said.

“There should be clear conditions on when and how localization targets must be met — whether by parts volume or value.”

He added that instead of fragmenting the market, Vietnam should encourage manufacturers to collaborate and specialize to strengthen the domestic supply chain.