Tesla's Vietnam entity: Commercial distribution or a step toward manufacturing?

Speaking to Tuoi Tre (Youth) online newspaper, Nguyen Thi Xuan Thuy, lecturer at the University of Economics and Business under Vietnam National University, Hanoi, said Tesla is a familiar name in Vietnam's auto market.

In fact, several Tesla models, including the Model S, Model X, and Model 3, have been brought into Vietnam by private importers over the years.

However, these have mainly been cases on a very small scale, and Tesla has not previously had an official distribution network in Vietnam.

According to Thuy, the lack of a legal presence in Vietnam and the reliance on overseas imports have limited users' access to after-sales services, spare parts, and warranties.

"The establishment of its own legal entity in Vietnam marks a new step for the brand," Thuy said.

Where will Vietnam fit into Tesla's ASEAN strategy?

With the registered business lines, do you think the U.S. electric vehicle maker's presence will go beyond selling cars?

Nguyen Thi Xuan Thuy: It is true that we should not look at Vietnam simply as a standalone consumer market.

What is more important is where Vietnam will fit into Tesla's ASEAN strategy.

If Tesla only imports completely built-up vehicles into Vietnam, the immediate impact will mainly be increased competition in the EV market.

But if Vietnam can become a link in Tesla's supply, service or component network, or a production base for Tesla in the region, the industrial impact would be much greater.

Another factor worth noting is that Tesla has different sources of supply for the ASEAN market.

Its Shanghai plant is an important production and export hub for Tesla in Asia, while the company also has plants in Berlin and the U.S..

For now, if it exports to Vietnam, Tesla will certainly have to consider where its vehicles are produced, where they are exported from, and how it can make use of free trade agreements.

Vehicles produced in the U.S., China, and the EU have different positions in terms of access to the Vietnamese and ASEAN markets because of different trade commitments and rules of origin.

Therefore, I believe the biggest significance of Tesla establishing a legal entity is not how many Tesla vehicles it will sell, but that this could mark a shift from an isolated presence to an organized commercial presence.

From an industrial policy perspective, we need to turn the presence of a global corporation like Tesla into an opportunity to develop domestic services, human resources, technology and supporting businesses.

What advantages could the entry of a leading global automaker bring to Vietnam, particularly to the EV sector?

Nguyen Thi Xuan Thuy: Regardless of how famous or successful Tesla is, Vietnam and ASEAN remain new and potentially promising markets for the company, with consumer behavior different from that in the U.S., China or the EU.

Therefore, like any new business entering a market, Tesla will face its own opportunities and challenges.

For Vietnam, there is still considerable room for growth given that the car ownership rate remains in the motorization phase.

Consumers have also begun to become familiar with EVs, while the EV ecosystem is taking shape.

This creates an opportunity for new brands to enter the market.

However, in the automobile industry, the challenge for a company is not simply ensuring that its products are good enough to enter the market.

It also needs an entire ecosystem behind the vehicle, from sales and services to spare parts, warranties, and charging.

For Tesla, its advantages in terms of global brand recognition and technology are clear.

But turning those advantages into a business model suitable for Vietnam and connected to the ASEAN market will be a challenge that needs to be addressed.

Is Vietnam's EV market entering a new competitive race?

What challenges will Tesla itself and Vietnam's EV market face?

Nguyen Thi Xuan Thuy: Tesla's entry into the market will bring both opportunities and challenges to Vietnam's automobile market.

A major brand like Tesla will create more competition, promote product diversification, and potentially accelerate electrification, but it will also raise questions about the market's scale and structure.

Vietnam remains a relatively small automobile market in the region.

If too many brands enter the market but each operates on a small scale, achieving economies of scale and building a sufficiently deep ecosystem will be a challenge.

The participation of new businesses in a policy-sensitive industry such as automobiles will also create challenges for policymaking.

The opportunity Tesla brings is that new competition and investment could help the market, technology, and EV ecosystem develop faster.

The ecosystem includes infrastructure, supporting industries, technology, and services serving the production, operation, and development of electric vehicles.

But policies also need to adapt to a changing market, from charging infrastructure and technical standards to electricity supply, incentive mechanisms, and industrial development.

More importantly, rapid development of the EV market does not necessarily mean Vietnam will develop its EV industrial capabilities.

Therefore, the opportunities and challenges for businesses and the industry as a whole should not be assessed simply by how many brands are in the market or how many EVs are sold.

What matters is what the participation of new businesses leaves behind for Vietnam's industry, including suppliers, human resources, technology, R&D, and domestic value creation.

This is also what needs to be observed in Tesla's case.

Whether the company will primarily be an importer and distributor of vehicles, or whether its presence will create deeper links with Vietnam's industrial sector, remains an open question that will take time to answer.