Electric cars

The world’s largest contract manufacturer made a buyout bid to the subsidiary of Vietnam’s largest conglomerate, Vingroup, Reuters quoted two sources as saying.

But VinFast prefers a partnership since it is keen to brand itself as an eco-friendly automaker and wants to retain its electric vehicle business, one of the sources said.

In January, VinFast introduced three self-driving cars that are expected to hit the market later this year.

It tested autonomous vehicles in California in the U.S., one of the first foreign markets the company is eyeing.

Earlier this month it signed a memorandum of understanding with Taiwan’s ProLogium Technology Co. Ltd. for the production of batteries for electric cars.

VinFast plans to set up over 2,000 charging stations across the country this year to expand its electric vehicle ecosystem.

Vietnam’s first indigenous car manufacturer sold around 30,000 gasoline vehicles last year and expects sales of more than 45,000 this year.

VinFast has announced it has begun taking orders for its first electric car model VF e34 and plans to deliver cars by November.

VinFast VF e34 is a C-class electric car model, equipped with one electric engine with maximum capacity of 110 KW, using 42kWh battery that allows a distance of 300 kilometers after every battery charge. If using the fast charging mode, the car will be able to go 180 kilometers after 15 minutes of charge.

The car has driver assistance features and modern safety features. Instead of selling cars with batteries, VinFast is offering a battery rental model.

With the retail price at VND690 million, the electric car model is even cheaper than internal combustion engine cars of the same C class.

Analysts say that with such a competitive price, a 10-year warranty, and the development of charging stations throughout the country, electric cars will be rivals to internal combustion engine cars.

Besides VinFast, other automobile manufacturers intend to assemble electric cars in Vietnam, including Mitsubishi. Sources said some foreign invested auto manufacturers in Vietnam have had meetings with Vietnamese agencies to express their wish to expand their investment and make electric cars in the future.

Market potential

A survey conducted by Frost & Sullivan in 2018 in Southeast Asia found that 33 percent of Vietnamese have thought of buying electric cars as their first cars.

Vietnam is a promising market as the country is entering the motorization period. The rapid increase in the number of cars, however, is leading to a high volume of emissions that pollute the environment.

Therefore, electric cars prove to be a good choice, especially in large cities and populous areas. Electric car manufacturers are also thinking of exporting products to AFTA markets.

Grabbing opportunities

Experts believe that electric cars will become popular from 2030 onwards.

Vietnam is a promising market as the country is entering the motorization period. The rapid increase in the number of cars, however, is leading to a high volume of emissions that pollute the environment.

In order to manufacture electric cars, four major technologies are needed – electricity storage (battery), electric engine, electricity converting machine (charge) and steering technique.

Once the technologies develop, they will completely change manufacturing and service sectors, including consumer behavior, and create a spillover effect on socio-economic development.

In Southeast Asia, Thailand and Indonesia are competing fiercely to attract investments into electric car manufacturing with the ambition to become the world’s electric car manufacturing centers.

Thailand has announced a plan to become an electric car and motorbike manufacturing center in ASEAN, under which it would put out 750,000 products a year. The plan offers major incentives to investors and supports forcing electric car prices down to closer to petrol- and oil-run cars.

Indonesia is on the way to become an electric car manufacturing center in the region and it aims to exceed Thailand in terms of scale. Over the last two years, it has attracted investment projects capitalized at billions of dollars for both car and battery manufacturing.

After Thailand released its plan to develop electric cars, Vietnam’s Prime Minister in April 2020 asked the Ministry of Investment and Industry to consider the issue with an aim to develop Vietnam’s electric car industry and not lag behind regional countries.

At this time, electric car manufacturers can enjoy a preferential luxury tax and a car part import tax.

Nguyen Minh Dong, a respected automobile expert, noted that some of Vietnam’s enterprises have invested to make electric cars on a large scale, develop charging stations and plants to make batteries as well. However, a master plan on electric car ecosystem still has not been figured out. And there are still no clear technical standards for manufacturers to observe.

“It is necessary to build a development strategy with feasible policies, or Vietnam will miss the opportunity,” Dong said.

Tran Thuy

In early 2018, a company in Hanoi went to the US to learn about a model of electric cars – Tesla Model 3 – for distributing in Vietnam. With a starting price of $35,000 per car, plus 70% import tax, 15% special consumption tax and 10% value added tax, the price for a car is estimated to be around VND2 billion (nearly $100,000).

This price was not much higher than some imported luxury cars using gasoline. However, after consideration, this distributor decided to not import this type of car because technology was limited and the infrastructure for electric cars in Vietnam was underdeveloped.

In 2017, Mai Linh Group planned to develop electric taxis in big cities. However, this plan failed because of a simple reason: there were no charging stations for electric taxis. Moreover, what would happen if the electric taxi had to stop for at least 30 minutes for charging? In general, electric cars seem to be as inconvenient as cars using gasoline

The current electric vehicle market has witnessed significant progress compared to 2-3 years ago. VinFast has received orders for its first electric car model, which is expected to be handed over in November 2021. Some other firms have imported electric cars for distribution. The prices of these cars are similar to gasoline-fueled cars in the same segment.

In some cities, there are also a few charging stations for electric vehicles, where electric cars can be quickly charged within 25 minutes to have power enough for traveling 200 km. In the near future, many fast-charging stations will be built across the country, with a charging time of 15 minutes, for traveling nearly 200 km. However, that is not enough for the development of electric vehicles.

When will gasoline-fueled cars replaced by electric vehicles?

In the world, consumers only buy electric cars with batteries useful for a distance of 400km, with fast charging times and cheap prices.

According to automotive expert Nguyen Minh Dong, one of the most important components of an electric car is the battery.

Currently, all electric vehicles use lithium battery technology, also known as liquid batteries. The power capacity of this battery has reached its limit with 150 Wh/kg. To increase the capacity, the volume of the battery will be large, resulted in high costs and poor performance.

For example, the Tesla Model S can travel 413km on a single charge, but the 85kWh battery costs up to $17,000, accounting for nearly half of the car’s value.

Moreover, the risks of causing fire or explosion of liquid batteries is very high. Slow charging takes time, while fast charging is more likely to lead to the risk of fire. This poses an urgent need to develop a new battery generation.

Many people believe that the future of electric vehicles is solid-state batteries. Solid-state battery technology uses solid electrolytes, replacing liquid electrolytes. It is possible to make batteries that are smaller in size with a greater capacity. Solid state batteries are also safer for users because they do not contain toxic, flammable liquids and have a longer lifespan. In particular, this type of battery also has a faster charging speed.

However, solid-state battery technology is still under research and development and production costs are high.

Toyota (Japan) has invested $13.9 billion in research and development of solid-state batteries. Toyota tested its first model of car using solid-state battery in late 2019. Samsung (South Korea) has created a solid-state battery model, which allows an electric car to travel up to 800km for one charge and the battery a lifespan of more than 1,000 times of charging. ProLogium (Taiwan) is testing new battery technology and is expected to be put into operation in 2023. In Vietnam, VinFast has cooperated with ProLogium to manufacture solid-state batteries.

It is said that electric cars using solid state batteries will appear on the market from 2025.

However, after a good battery, an equally important requirement is the charging station. Gasoline cars can be refueled at tens of thousands of petrol stations across the country, but for electric cars, there are no viable charging system in Vietnam in the near future. Electric vehicle manufacturers have committed and endeavored to develop charging station systems. However, the establishment of tens of thousands of charging stations across the country is not easy and can be beyond the capacity of a single firm.

Tran Thuy

Vice Chairman of the National Traffic Safety Committee Khuat Viet Hung.

Electric cars are a current trend around the world. What do you think?

It is an irreversible trend. Electric cars are a choice for the present and the future. And we can feel it by the way the market responds positively to VinFast’s electric scooter products (when the company put the product on sale, there were 4,000 orders after 12 hours). It is not only the credibility of the market with a car manufacturer, but also because people are really looking forward to and excited about electric cars.

In the world as well as in Vietnam, environmental issues are becoming more urgent. Encouraging people to switch to low-emission vehicles such as electric cars, electric motorcycles, electric buses and trains is one of the effective solutions to reduce environmental risks. Some countries have a roadmap to stop use of gasoline cars in the next decade and replace them with electric cars.

So, although I am a bit surprised at the time, I am not surprised when VinFast affirms its vision of becoming a global smart electric car company and announced the development of three electric models. In the near future, the auto market is likely to be more active with the participation of foreign electric models. But regardless of brand, what both manufacturers and users are waiting for is a system of appropriate support policies to gradually form and develop a stable and sustainable market for electric cars in Vietnam.

What should the supportive policy system be to promote the electric car market?

The Government needs to have a comprehensive programme, including a system of solutions to encourage and support users as well as manufacturers. Specifically, for manufacturers, those are policies to encourage research, development, commercialisation, and supply chain construction (from research and development of battery technology, fuel cells, operating systems to a complete car). For users, there are specific support policies to help them easily own, use and gradually create a habit of driving an electric car. All countries developing electric vehicles must have a very specific and strong market-making strategy and policy.

Can you give us more details about effective market making policies?

Each country has different market-creating policies, but the US, European nations, Japan, South Korea, China all focus on reducing the cost of owning and using cars. For example, the German government waives the annual sales tax on electric vehicles, and provides direct subsidies to electric vehicle buyers of between 3,000-5,000 euros (US$3,600 – $5,980).

South Korea provides a one-time subsidy of 14 million won ($12,500), tax relief, insurance fees, highway tolls and parking fees for electric vehicle owners. China subsidises 20,000-40,000 yuan (over $3,050 – $6,100) depending on electric vehicles; at the same time, plans and invests in a nationwide network of electricity supply infrastructure. In addition, each locality has its own incentives, for example, the city of Shanghai gives free licence plates to electric cars.

These are all developed countries that have the conditions to directly support people switching to electric cars. Is this feasible in Vietnam when the budget has to prioritise more urgent goals?

First of all, it is necessary to be aware that the rapid development of electric cars is an opportunity to rise in the global auto industry and an inevitable trend.

Therefore, the policy of the Party and the State to encourage the development of electric cars in particular and environmentally friendly vehicles in general needs to be concretised with clear policies and legal provisions, transparency, so that both users and manufacturers can be assured of the issue.

Next, it is difficult to ask the Government of Vietnam to provide direct subsidies to buyers of electric cars like the aforementioned countries in limited budget conditions. But it’s entirely feasible for the Government to support part of the cost of vehicle ownership for people, for example, a partial or full reduction of registration fee, special consumption tax, or partial or full reduction of road user fees.

For manufacturers and businesses, the Government may consider reducing import tax on electric vehicle components, supporting related infrastructure such as land allocation, land use tax exemption or reduction for automobile factories or ancillary products as well as charging station systems. Of course, these market-making policies are only for a certain period, maybe 10 years.

Will such policies be enough to bring about the change?

The goal is that the subsidy policies for a certain product or service of the Government would create a universal cultural value in the whole society for that product or service. Therefore, policies will be continuously observed, evaluated and adjusted. But I believe that after a period of support, the market size will be large enough, the culture of using electric vehicles will form and have enough momentum to develop itself.

Of course, to create the habits of users, the issue also depends on the ability of technology, services, and convenience of electric vehicles to meet the wishes of people. Therefore, apart from creating conditions for the electric car industry, we need to create open directions to other related supporting industries, such as battery production, to shorten technology development time for green means.

Where should we begin?

In my opinion, the Government needs to set a clear goal, for example, by 2025 or 2030, how many per cent of cars in the market are electric cars; how emissions reductions and environmental goals should be achieved; determine which agencies and individuals are responsible for promulgating, guiding, implementing and monitoring the implementation of market-making policies, etc.

From these goals, the Government needs to calculate in detail the problem of financial, economic and environmental benefits that electric cars bring when replacing fossil fuel-powered cars. Then it balances the total financial resources and the specific conditions that the government and local authorities can support, in a certain time to concretise into legal, transparent documents.

Of course, change does not come overnight, but we have a partial advantage when there is a generation of young people exposed to the culture of electric vehicles very early, from electric bicycles to electric motorcycles. That is the generation of the green future. And our job is to prepare that future generation, now.

VNS