As Vietnamese government considers proposed reforms to its automobile industry regulations, domestic manufacturers and industry bodies have raised concerns over the potential impact of easing current business conditions on local production, investment and industrial development.

While some stakeholders argue that removing conditions entirely could encourage low-cost imports and weaken domestic production capacity, others state that the current system imposes unnecessary costs and slows innovation.

Major domestic carmakers have urged authorities to retain the current business conditions for the automobile industry, warning that a proposed rollback could weaken domestic manufacturing and leave the market vulnerable to low-cost imports. The appeal comes as the Ministry of Finance drafts a reform plan, including a proposal to remove automobile manufacturing, assembly and import activities from the list of conditional business lines.

Major industry players, including Thaco, VinFast and TC Group, have submitted petitions to the Prime Minister and relevant ministries, citing the sector's economic role.

Thaco stated that easing investment and business conditions in the automobile sector would be inappropriate because the sector affects manufacturing, employment, public safety and the environment. The company also noted that vehicles have long life cycles, placing continued responsibility on manufacturers and distributors, while consumers should have access to firms with sufficient capacity to provide warranties, maintenance services, spare parts and product recalls.

According to Thaco, requirements relating to factories, production lines and after-sales service infrastructure should not be regarded as administrative barriers, but as measures intended to ensure product quality and accountability throughout a vehicle's life cycle.

VinFast stated that requirements for production facilities and technical capacity reflect a manufacturer's commitment to vehicle production and assembly. The company added that these requirements should be maintained to prevent underqualified firms from entering the market, as automobiles are high-value products involving complex technologies.

TC Group also raised concerns regarding competition, arguing that removing conditions entirely could provide importers with an advantage over domestic manufacturers that have invested heavily in local production. The company stated that if barriers are lowered, importers may enter the market more easily, placing domestic producers that carry long-term investment costs at a disadvantage.

Division

The proposed reforms have exposed divisions among policymakers, businesses and industry experts.

Some stakeholders argue that removing conditions entirely could lead to an influx of low-cost imports and weaken domestic production capacity, while others state that the current system imposes unnecessary costs and slows innovation, particularly in emerging areas such as electric and autonomous vehicles.

The Ministry of Industry and Trade has previously highlighted similar risks, stating that removing current requirements could weaken localisation efforts by encouraging firms to import nearly complete vehicles for simple assembly instead of investing in manufacturing capacity.

The ministry also warned of potential trade risks, including the possibility that surplus production capacity from neighbouring countries could be redirected to Vietnam through low-value assembly projects to avoid taxes and potentially expose Vietnam to trade defence investigations from other markets.

However, the Vietnam Chamber of Commerce and Industry (VCCI) supported the proposal to abolish the prerequisites for the automobile industry.

The VCCI stated that all vehicles, whether domestically produced or imported, are already subject to technical and environmental inspections before being permitted to enter the market.

According to the chamber, additional licensing requirements would duplicate existing oversight mechanisms and increase compliance costs without improving safety.

The VCCI also stated that current rules create high entry barriers, limiting competition in the import market and increasing vehicle prices in the domestic market compared with other ASEAN countries. The chamber further noted that high market-entry conditions have not effectively supported domestic industrial growth, citing statistics showing that after more than two decades of development, the local procurement rate remains at around 7-10% for passenger vehicles, compared with 70-80% in Thailand.

Regarding concerns over trade circumvention, the VCCI stated that Vietnam already has legal mechanisms in place, including anti-dumping measures and rules of origin under free trade agreements, to address such risks.

The VCCI also argued that current business conditions are designed for traditional automobile manufacturing models involving welding, painting and assembly processes, and may no longer be suitable in the era of electric and autonomous vehicles.

According to the chamber, such regulations could create barriers for new investors entering emerging automotive segments. Countries including the US, Japan, South Korea and members of the EU do not require manufacturers to obtain specific production and assembly eligibility certificates. Instead, these markets regulate the sector through technical standards, mandatory recall mechanisms and product liability rules under civil law.

The chamber called on the Ministry of Industry and Trade and the Ministry of Transport to strengthen technical standards and post-market inspection mechanisms to ensure user and community safety.

A balanced approach

According to Vietnam Automobile Manufacturers' Association representative Dao Cong Quyet, Vietnam's automobile market remains smaller than those of Thailand and Indonesia.

Quyet stated that if the market is fully opened, there is a risk that it could become dominated by imports. He added that maintaining business conditions helps guide industrial development and prevent fragmented and inefficient investment.

President of the HCM City Society of Automotive Engineers Do Van Dung stated that the decision to remove or retain business conditions should be studied carefully, adding that policymakers should avoid abrupt changes.

"The industry is in a transition period, moving from assembly to manufacturing and shifting towards electric vehicles," he said.

Dung further added that sudden policy changes could affect the development of domestic production and supply chains, while also potentially triggering an increase in completely built-up vehicle imports and weakening long-term investment by domestic producers.

"There needs to be a balanced approach. Maintaining core requirements on safety, environmental standards and production capacity is important, but unnecessary administrative procedures should be removed," he said.

Tran Anh Tung, head of the Business Administration Faculty at HCM City University of Economics and Finance, stated that removing business conditions would place the market under short-term pressure from low-cost imported vehicles and trading firms, while domestic manufacturers continue to bear long-term investment costs.

He further added that the issue is not whether the conditions should be fully retained or abolished, but how they should be redesigned transparently with a focus on technical standards, environmental protection, safety, warranty responsibility and production capacity, rather than creating additional sub-licences.

Vietnam's automobile sector currently accounts for more than 3% of GDP and provides approximately 200,000 jobs.

Domestic production has grown steadily and accounted for roughly 65-75% of total sales.

The country is also home to approximately 650 automobile and parts manufacturers, with more than 400 suppliers meeting tier-one standards, representing an increase of more than 200% compared with 2016.