Vietnam Passenger Car Market Outlook to 2028

Vietnam Passenger Car Market Overview

Vietnam Passenger Car Market reached a size of USD 8 billion in 2023, driven primarily by increasing disposable income and a growing middle class, indicating steady growth. Key factors contributing to this expansion include urbanization, improved road infrastructure, and a shift in consumer preference towards personal vehicles over public transportation.

Major players in the Vietnam Passenger Car Market include Toyota, Hyundai, Kia, Honda, and Vin Fast. These companies dominate due to their strong brand presence, extensive dealership networks, and localized manufacturing capabilities. Toyota leads the market followed closely by Hyundai and Kia. Local manufacturer Vin Fast is rapidly gaining market share leveraging its appeal as a homegrown brand.

In 2022, Vietnam has launched the Nissan Kicks e-Power hybrid, marking its entry into the Southeast Asian market. This compact SUV boasts impressive fuel efficiency at 2.2L/100 km and is priced between VND 789 million and VND 858 million. The Kicks e-Power, available in two variants (E and V), aims to compete with the Honda HR-V, Hyundai Creta, and Kia Seltos, becoming the first hybrid in its segment in Vietnam.

Hanoi and Ho Chi Minh City dominate the passenger car market in Vietnam in 2023. This dominance is due to higher income levels, rapid urbanization, and a growing middle class in these cities. Additionally, improved infrastructure and road networks have facilitated easier car ownership, making these cities prime markets for both international and local automotive brands.

Vietnam Passenger Car Market Segmentation

By Vehicle Type: Vietnam Passenger Car Market is segmented by vehicle type into sedans, SUVs, and hatchbacks. In 2023, sedans dominated the market driven by their affordability and suitability for urban driving conditions. Sedans are particularly popular among middle-income families and young professionals due to their fuel efficiency and lower maintenance costs. Additionally, their compact design makes them ideal for navigating narrow city streets and finding parking in crowded urban areas.

By Fuel Type: Vietnam Passenger Car Market is also segmented by fuel type into petrol, diesel, and electric vehicles (EVs). Petrol vehicles continued to lead the market share in 2023, mainly due to the well-established fuel infrastructure and consumer familiarity. Additionally, petrol vehicles offer a wide range of options across different price segments, catering to diverse consumer preferences. Their relatively lower upfront costs compared to diesel and electric vehicles further contribute to their sustained popularity in the market.

By Region: Vietnam Passenger Car Market is segmented by region into North, Central, and South. The Southern region, held a dominant share in 2023 due to its higher population density and stronger economic activity. The region's well-developed transportation infrastructure and higher disposable incomes have also fueled demand for passenger cars. Moreover, the concentration of automotive dealerships and service centers in the South provides greater accessibility and convenience for consumers, further boosting sales.

Vietnam Passenger Car Market Competitive Landscape

Company

Establishment Year

Headquarters

Toyota

1937

Toyota City, Japan

Hyundai

1967

Seoul, South Korea

Kia

1944

Seoul, South Korea

Honda

1948

Tokyo, Japan

Vin Fast

2017

Hanoi, Vietnam

Hyundai Motor: In 2023, Hyundai Motor has commenced local production of the fully electric IONIQ 5 in Vietnam. This initiative is part of Hyundai's strategy to strengthen its presence in the expanding electric vehicle market in the country. The IONIQ 5 is being manufactured at the Hyundai Thanh Cong factory in Ninh Binh province, marking the first high-tech electric vehicle produced locally by Hyundai.

Toyota: In 2022, Toyota Vietnam launched locally assembled units of the Veloz Cross and Avanza Premio in V?nh Phúc province. These models were initially introduced as completely built units imported from Indonesia in March 2022. The decision to produce them locally aims to increase supply and the proportion of locally made components in their vehicles, addressing the limitations in imported vehicle availability.

Vietnam Passenger Car Industry Analysis

 Growth Drivers:

Expansion of Middle-Class Population: The Vietnamese middle-class population is significantly driving the demand for passenger cars. In December 2023, Vietnam recorded passenger car sales of 290,071 units, an increase from 283,352 units in December 2022. This reflects a robust growth trajectory in the automotive sector. This demographic shift is crucial as car ownership becomes a symbol of status and convenience.

Improved Road Infrastructure: Vietnam’s government has invested heavily in road infrastructure allocated for road development from 2021 to 2025. Currently, Vietnam has approximately 570,448 kilometers of roads, with national highways comprising 24,136 kilometers and expressways totaling 816 kilometers. These investments in road infrastructure, particularly in expanding national highways and expressways, are expected to significantly improve the efficiency and convenience of travel for passenger cars across the country hence driving the market growth.

Increasing Adoption of Electric Vehicles (EVs): With the growing government's focus on reducing carbon emissions, the adoption of electric vehicles in Vietnam is accelerating. As a result, EV sales in Vietnam are expected to triple by 2025, with significant contributions As of August 2022, nearly 3,000 electric cars had been produced, assembled, or distributed in Vietnam since the launch of the first electric car model by Vin Fast in December 2021.

 Challenges:

High Import Tariffs: Despite the growth potential, the Vietnam passenger car market faces challenges due to high import tariffs on foreign vehicles. These tariffs limited the diversity of vehicle options available to consumers, particularly for luxury and specialty vehicles. This has led to a preference for locally assembled vehicles, restricting market competition and potentially limiting innovation.

Limited EV Charging Infrastructure in Rural Areas: While urban centers are seeing a rapid expansion of EV infrastructure, rural areas in Vietnam lag behind significantly. This disparity presents a challenge for EV adoption in rural regions, where the population still relies heavily on traditional fuel vehicles. The lack of infrastructure in these areas limits the growth potential for the EV segment of the passenger car market.

Government Initiatives:

EV Subsidy Program (2023): The Vietnamese Ministry of Transport has proposed a $1,000 subsidy for buyers of electric vehicles, including battery-powered EVs, fuel cell electric vehicles (FCEVs), and solar EVs. This subsidy aims to encourage consumers to switch from fossil fuel vehicles to eco-friendly electric alternatives. The initiative also includes tax exemptions for EV manufacturers, aimed at boosting local production and making EVs more affordable for the average consumer.

Road Infrastructure Development Plan (2021-2025): Announced by the Ministry of Transport in April 2021, this plan outlines ambitious goals for enhancing the country's transportation infrastructure with a projected investment ranging from USD 43 billion to USD 65 billion. The plan aims to construct over 5,000 kilometers of new expressways by 2030, significantly increasing the total from 3,841 kilometers in 2021.

Vietnam Passenger Car Future Market Outlook

Vietnam Passenger Car Market is poised for significant growth over the next five years, driven by a combination of increasing consumer demand, government support for electric vehicles, and ongoing infrastructure development.

Future Trends

Expansion of Electric Vehicle Segment: The electric vehicle segment in Vietnam is expected to see robust growth over the next five years, driven by government incentives and increasing consumer awareness of environmental issues. As more EV charging stations are installed across the country, particularly in urban areas, the adoption rate of EVs is set to accelerate, with domestic manufacturers like Vin Fast leading the charge.

Increased Localization of Production: Vietnam’s automotive industry will likely see a shift towards greater localization of production, with more manufacturers investing in local supply chains to reduce reliance on imported components. This trend will be supported by government initiatives aimed at promoting local content and reducing production costs, making Vietnam an increasingly attractive destination for automotive manufacturing.
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