Vietnam has recently unveiled one of the most ambitious transport decarbonisation roadmaps in Southeast Asia. The policy direction reflects the government’s strong commitment to tackling urban air pollution and advancing long-term climate objectives. However, the pace and scope of the proposed transition are also raising questions among industry stakeholders and consumers regarding implementation readiness, infrastructure availability and economic impacts.
On 12th July 2025, Prime Minister Pham Minh Chinh signed Directive 20/CT-TTg, introducing urgent measures aimed at reducing air pollution nationwide, particularly in major cities. A central element of the directive is a phased plan to eliminate fossil-fuel powered personal vehicles. Under the proposed roadmap, Hanoi is expected to become the first city to implement restrictions on fossil-fuel vehicles, beginning with a ban on fossil-fuel motorcycles and mopeds within the inner Ring Road 1 area starting as early as 1st July 2026.
The directive forms part of a broader strategy to transition Vietnam’s transport sector toward green energy. Key milestones include achieving a fully electrified or green-fuel bus fleet by 2025, increasing the share of vehicles powered by electricity or green fuels to at least 50% by 2030, and fossil-fuel powered automobiles and motorcycles by 2040, with the long-term objective of establishing a carbon-neutral transportation system by 2050. The policy framework has been supported by the NDC Transport Initiative for Asia, which has worked with Vietnam’s Ministry of Transport to strengthen the legal framework and contribute technical expertise to the action plan.
While the directive aligns with Vietnam’s long-term decarbonisation objectives, industry stakeholders have raised concerns regarding the feasibility of the proposed timeline and its potential impact on the vehicle market. The Vietnam Automobile Manufacturers Association has noted that the proposed Corporate Average Fuel Consumption of 4.83% litres per 100 kilometres by 2030 could significantly reshape the current market. Industry estimates suggest that approximately 96% of gasoline=powered vehicle models currently available in Vietnam would not meet the proposed standard, together with around 14% of hybrid models.
In response, the association has proposed a more gradual approach, suggesting that fuel consumption targets be tightened progressively from 6.7L/100 km by 2027 to 6.0L/100 km by 2030. Even under this moderated scenario, automakers estimate that internal combustion engine vehicle production would need to decline substantially while elective vehicle sales would have to increase significantly in order to meet the targets.
The announcement of the directive has already begun to influence consumer behaviour. Reports from the Vietnam News Agency indicate that dealerships are experiencing order cancellations, vehicle returns and deposit forfeitures as consumers grow increasingly uncertain about the resale value and long-term viability of gasoline-powered vehicles. Used vehicle dealers have similarly reported a decline in sales as potential customers delay their purchasing decisions while awaiting further regulatory clarity.
Beyond regulatory considerations, the transition to electric mobility also presents practical challenges related to affordability and infrastructure readiness. Electric vehicles typically carry higher upfront acquisition costs compared with gasoline-powered vehicles, which may limit accessibility for many households. Charging infrastructure remains another constraint, particularly in older apartment buildings and densely built residential areas where installing charging points may be more complex. Without adequate infrastructure expansion, the pace of electrification could place additional pressure on consumers and businesses.
Policy observers have noted that while Hanoi’s efforts to address urban air pollution are widely welcomed, the success of the transition will depend on the availability of supporting policies, including financial incentives and infrastructure investment. Although several financial support packages have reportedly been proposed by the government, these measures have not yet been fully ratified.
Comparisons between Hanoi and Ho Chi Minh City also highlight differing implementation approaches. While Hanoi appears to prioritise infrastructure development and support for residents, Ho Chi Minh City has adopted a more gradual strategy focusing on specific high-mileage vehicle groups such as ride-hailing and delivery riders. Interviews with drivers published in local media highlight concerns about battery range, charging accessibility and the relatively high cost of electric motorcycles compared with average incomes.
Survey findings from the Institute of International Economics and Law under the Vietnam Union of Science and Technology Associations suggest that more than 70% of citizens would require financial assistance or access to low-interest loans in order to make the transition to electric vehicles. Several experts have therefore emphasised the importance of a balanced transition pathway. Dr Ta Ngoc Hai, former Deputy Director of the Institute of State Organisational Science under the Ministry of Home Affairs, has noted that the transition process should combine restrictions with appropriate support measures in order to generate positive social outcomes. Environmental expert Dr To Van Truong similarly highlighted that while the government’s directive represents an important step forward, careful timing and public consensus will be critical to ensuring effective implementation.
Infrastructure expansion has also been identified as a key priority. Nguyen Van Thanh, former Chairman of the Vietnam Automobile Transportation Association, has recommended expanding charging infrastructure across filling stations, residential complexes, parking facilities and commercial centres while ensuring compatibility across different vehicle types.
As Vietnam advances its transport decarbonisation strategy, several implementation challenges therefore emerge. The proposed timeline for phasing out fossil-fuel vehicles may prove difficult to achieve in practice given the time required for vehicle fleet turnover and infrastructure development. Rapid restrictions could also have broader economic implications across automotive manufacturing, supply chains and service industries. Certain groups, particularly delivery drivers and small businesses that rely on affordable two-wheel vehicles, may face mobility constraints if the transition occurs faster than supporting measures can be implemented.
At the same time, questions remain regarding regulatory enforcement and implementation capacity at the city level. Clarification will likely be required on how the directive will be monitored and enforced in practice.
Several countries provide useful examples of how transport electrification strategies can be successfully implemented when supported by long-term planning, infrastructure investment and coordinated policy measures. Norway leads the world in electric vehicle (EV) adoption, with EVs comprising 92% of new passenger car sales in 2024. The high adoption rates were achieved through a combination of significant tax exemptions, incentives for charging infrastructure, and policies that make EVs more cost-competitive than internal combustion engine vehicles.
Other European countries, such as Sweden, Denmark, Finland and the Netherlands have also consistently maintained high EV sales shares, ranging from 48% to 58%, driven by stringent emissions regulations, consumer incentives, and aggressive national targets for decarbonizing transport.
China is also a primary example of a successful EV strategy, dominating both global production and sales through decades of consistent policy, subsidies, and infrastructure investment. China has integrated EV development into its highest-level economic planning since 2001. By fostering a massive domestic supply chain, providing substantial subsidies, and prioritizing battery technology, it has become the world’s largest producer and consumer of EVs.
The success of the EV strategy in the aforementioned countries has also been attributed to their thoughtful, long-term planning of the charging infrastructure in each country, with significant investments made to ensure that charging is accessible and reliable. It is also crucial to highlight that a phased and sustainable implementation requires significant funding to support infrastructure investments and subsidies for early scrappage schemes and to bring low emission/EVs costs lower to meet the purchasing power of the commuters most impacted. Lastly, a Low Emission Zone does not have to be immediately a Zero Emission Zone – if combustion engines can meet the minimum emission criteria, then in combination with cleaner fuels, there can already be significant air quality improvement. In many successful markets, governments have combined supply-side support for manufacturers with demand-side incentives for consumers, helping the automotive industry transition with minimal job displacement while accelerating vehicle adoption.
Regional electrification roadmaps developed by organisations such as Clean Air Asia – including the Comprehensive Roadmap for the Electric Vehicle Industry developed with government partners in the Philippines – demonstrate how phased policy implementation, infrastructure investment and market incentives can support a successful transition in Southeast Asian economies.
The electrification policy also coincides with Vietnam’s planned increase in the mandatory biofuel content in gasoline from 5% to 10%, starting in July this year. This may potentially worsen urban air quality as experienced in Mexico City, which showed that Ethanol increases VOC and acetaldehyde emissions, which are significant in the formation of smog. It also causes higher evaporative emissions. Beyond this, the country’s dependence on import supplies of biofuels will increase.
While electrification remains a central component of Vietnam’s long-term decarbonisation strategy, improvements in fuel quality and emission standards also offer complementary near-term benefits.
Measures such as tightening gasoline standards, increasing octane ratings and reducing harmful additives have been implemented in many regions around the world to reduce emissions from existing vehicle fleet. Oxygenated fuels like MTBE and ETBE have been used extensively in gasoline blending across Europe, parts of Latin America, China and North-East Asia as well as several other economies in Asia, including Malaysia and Singapore. These approaches improve combustion efficiency and reduce certain emissions without requiring major changes to existing vehicle configuration and fuel distribution systems.
As Vietnam’s electrification transition unfolds over the coming decades, fuel quality improvements may therefore provide an additional pathway to deliver immediate air-quality benefits while maintaining affordability and mobility for consumers. A balanced policy approach that combines long-term electrification with practical near-term emissions reduction measures may help ensure that the transition remains both environmentally effective and economically sustainable.
ACFA is happy to assist in addressing urgent questions regarding air pollution and its control by contributing to the development of a rapidly implementable, proven to be successful and cost-effective catalogue of measures, to make ICE vehicles part of the solution.
In this issue of our “In Conversation with” we talked to Mr. Jeff Hove, acting Vice President and Executive Director at the Fuels Institute. In recent years we have seen some initiatives to consider policies to ban the sale of vehicles equipped with internal combustion engines (ICE), predominantly emerging in Europe, but also spreading out in parts of Asia.
In this issue of our “In Conversation with” we talked to Dr Tilak Doshi, an energy sector consultant based in Singapore. Dr Doshi shared his views and observations about the global “2050 decarbonisation” plan and move towards Electric Vehicles (EVs) with us. We would like to thank Dr Doshi for his efforts to comprehensively answer our questions which provide some highly valuable and very interesting insights into this matter, highlighting a range of topics often overlooked in the political discussion between the various stakeholders in the race to save the world from impending climate catastrophe.
In this issue of our “In Conversation with” we talked to Dr Sanjay C Kuttan, Chairman of the Sustainable Infrastructure Committee at Sustainable Energy Association of Singapore (SEAS).
.svg)
.svg)
