Vietnam has a problem. Between now and 2050, its economy may see the strongest growth globally, according to a February 2017 forecast by PricewaterhouseCoopers. But that may also see its air pollution crisis worsening further.
Vietnam counts two cities ranked in the top 20 of Numbeo’s 2017 Pollution Index. Its largest city, Ho Chi Minh, is the most polluted city in Southeast Asia, while its capital Hanoi is not far behind on third place.
This is on top of other quality-of-life concerns such as Vietnam’s food safety issues and high alcohol consumption. A major factor contributing towards the pollution is rising car ownership, which is also causing a massive traffic congestion issue.
Growing Automotive Market
Vietnam’s auto industry is nascent and still in its early growth stages. For perspective, the local industry sold 304,427 cars in 2016, up 27% from the previous year. That followed a 55% increase year-on-year in 2015.
That puts Vietnam as the second-fastest growing car market in the world last year. However, domestically produced cars only hit 50,000 in 2016, meaning much of the volume are imported vehicles.
The strong growth in car sales comes amid the loosening of Vietnam’s import taxes for cars, which was reduced further from 40% to 30% in 2017 and due for full elimination next year. The auto market boom has in turned boosted government coffers, which enjoys substantial tax revenue from one of Asia’s most expensive automotive tax structure (e.g. heavier consumption tax and registration fees).
While the tax revenue is good for Vietnam’s economic growth and infrastructure, the Vietnamese government recognises the problems that arise on the traffic congestion and health concerns. Its proposed solution goes back to public transportation.
Vietnam’s Ministry of Transport aims to increase public transport modal share from below 10% to 25-30% by year 2020. This is part of a wider effort to reduce Vietnam’s greenhouse gas emissions by 8% between now and year 2030, which the government hopes may be as high as a 30% reduction with international support.
Transportation will be a significant driver. For perspective, in 2010 32 metric tonnes of Vietnams’ overall 225 metric tonnes of CO2 emitted came from transportation and this would have risen rapidly alongside its auto sector boom.
In a five-year plan up to 2020, the ministry aims to introduce 200 hybrid and 50 plug-in hybrid buses, which it expects to reduce emissions by up to 5 million metric tonnes of CO2 by 2030. This is also expected to lead to USD600 million in diesel fuel savings and USD40 million worth of reduced particle pollution and nitrogen oxide pollution, which should help improve air quality.
Financially, the government will support the hybrid and plug-in hybrid buses via grants from its low-carbon bus fund up to 30% of the cost. It expects to allocate USD15 million by 2020 for this purpose, while from 2021 to 2030, another 21,700 low-carbon buses are expected to require USD326 million in grants.
This plan is on top of other pockets of electric vehicle (EV) initiatives, such as promoting EV for tourist taxis. On the private vehicles front, people familiar with the matter indicated to Motion Digest that the government will likely to start looking into EV adoption by 2018.
That said, it remains to be seen whether the Vietnamese government will be aggressively funding EV infrastructure development or providing subsidies to support EV adoption. Recall that a local taxi company had aimed to replace its fleet of 10,000 taxis with EVs, but the plan did not take off due to lack of government support in terms of import taxes.
How Vietnam intends to push for EV infrastructure such as charging station network and such will be interesting. Further clues will arise as 2018 approaches, which is when more action should materialise if the Vietnamese government pushes through with the adoption.
In the meantime, it may look to what Asean neighbours are doing for inspiration: for example, Malaysia is stimulating EV infrastructure development through state-owned energy company Petronas alongside private sector initiatives.
Vietnam can look forward to inaugural ASEAN Electric and Hybrid Vehicles Summit at the Manila World Trade Center on June 29-30 to compare notes with its neighbours on how other EV industries are developing.
“Come see the latest technology from battery chargers and charging stations to electric motors to controllers to locally-produced EVs to hybrid cars and SUVs,” says Rommel Juan, president of the Electric Vehicle Association of the Philippines (EVAP), adding that there is a free exhibit featuring the latest in EV technology that is sweeping the region.