What should investors pay attention to when manufacturing electric vehicles in Vietnam?

 Date: 14 September 2021

Writers: Huy Nguyen & Quang Nguyen

Climate change and environmental pollution caused by vehicle emissions are an urgent issue globally in general and in Vietnamese cities in particular. Therefore, electric vehicles are being considered as the leading solution to reduce air and environmental pollution. So, what should investors pay attention to when manufacturing electric vehicles in Vietnam? Through this article, BLawyers Vietnam will help readers answer such a question.

Electric vehicles

1. The potential development for electric vehicles in Vietnam

With a population of over 96 million people, of which more than half own a personal vehicle, leading to an increase in environmental pollution and traffic jams. Especially, large cities such as Hanoi and Ho Chi Minh City have repeatedly ranked high in terms of large emissions globally.

Currently, Vietnam’s urbanization rate is about 3% per year with an increase in population and an expansion of the middle class. Besides, consumers are being environmentally conscious, saving fuel, and recognizing pollution levels rising rapidly in cities. Additionally, fuel prices increased while electricity prices were quite stable.

Thus, people are tending to switch from petrol vehicles to electric ones to contribute to improving the environment and combating climate change. This makes Vietnam a promising and potentially electric vehicles market.

2. Vietnamese standards for electric vehicles

Recently, the Ministry of Transport (“MOT”) has issued Circular No. 45/2019/TT-BGTVT promulgating 03 national technical regulations on batteries and engines used for electric bicycles, electric motorcycles, and mopeds, including:

  1. National technical regulation on engines used for electric bicycles (Code: QCVN 75:2019/BGTVT);
  2. National technical regulation on batteries used for electric bicycles (Code: QCVN 76:2019/BGTVT); and
  3. National technical regulations on engines used for motorcycles and mopeds (Code: QCVN 90:2019/BGTVT).

Accordingly, manufacturers of electric bicycles, motorcycles, and mopeds must meet technical regulations such as capacity, the efficiency of electric motors, insulation, etc. Besides, electric vehicle investors must also meet testing procedures before placing the products on the market.

As for the standards applied to electric cars, there are no specific regulations in Vietnamese law. Currently, MOT has issued regulation number QCVN 09:2015/BGTVT on stipulating national standards on quality, technical safety, and environmental protection for cars in general. Accordingly, cars manufacturers must meet technical regulations such as specifications, braking system, steering system, etc. Besides, this regulation also regulates environmental protection such as emissions limits.

3. Vietnam’s incentives for electric vehicle manufacturing

3.1. Incentives for special consumption tax (“SCT”)

According to the law, cars running on gasoline combined with electric energy in which the proportion of gasoline used does not exceed 70% of the energy used will be applied an SCT rate equal to 70% of the tax rate applied to vehicles of the same type.

For electric cars, the SCT rate is from 5% to 15%, depending on the type of vehicle, which is much lower than that of gasoline-powered cars with a tax rate of up to 150%.

3.2. Other forms of incentives

Electric vehicle manufacturing is on the list of industries eligible for investment incentives. Accordingly, depending on the investment area, the number of employees, and the scale of the project, investors in the manufacture of electric vehicles may be eligible for the following forms of investment incentives:

  1. Corporate income tax incentives, including the application of a lower corporate income tax rate than the normal tax rate for a definite term or the entire duration of the investment project; tax exemption, tax reduction, and other incentives following the law on corporate income tax;
  2. Exemption from import tax on goods imported to create fixed assets; raw materials, supplies, and components imported for manufacturing following the law on import, export tax;
  3. Exemption or reduction of land use fee, land rent, and land use tax; and/or
  4. Accelerated depreciation, increasing deductible expenses when calculating taxable income.

4. The procedures and certification needed for the manufacturing of electric vehicle

4.1. The procedures and certification needed for the manufacturing of electric bicycles, motorcycles
a. For Vietnamese investors

Currently, manufacturing electric bicycles, motorcycles are not a conditional business line. Also, the procedure for verifying that enterprises are eligible to manufacture electric bicycles and motorcycles has been canceled. Therefore, Vietnamese enterprises only need to carry out the procedures of registration the establishment of enterprise before proceeding to manufacture electric bicycles and motorcycles.

b. For foreign investors

The foreign investors must obtain the Investment Registration Certification and establish an enterprise under the laws before the manufacturing of electric bicycles and motorcycles (including approval on investment policy).

4.2. The procedures and certification needed for the manufacturing of electric cars

Similar to the above, Vietnamese enterprises must register for enterprise establishment and foreign investors must carry out investment procedures before producing electric cars in Vietnam. In addition, Vietnamese enterprises and foreign investors must also carry out procedures for applying for a Certificate of eligibility for manufacturing and assembling cars before going into mass manufacture.

Should you have any questions about the above contents, please revert to BLawyers Vietnam at consult@blawyersvn.com. We are more than happy to hear from you!

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