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Vietnam at a glance

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The EV story

The rise of EVs

In light of the grand energy transition, the rise of electric vehicles (EVs) in Vietnam reduces carbon emissions and produces green economic growth. Local EV makers have been particularly successful in electrifying two-wheelers (E2Ws), but growth will eventually slow while four-wheel cars pick up the slack. Although it is difficult to project the future of a rapidly evolving industry, we estimate that Vietnam’s annual E2W and electric car sales could rise from less than one million in 2024 to over 2.5 million by 2036.

Infrastructure investment is key

Crucially, government policies are encouraging EV production and consumption. But more investment is required in infrastructure and critical supply chain segments, such as rare earths. Traditionally, Japanese firms have led the two-wheel market in Vietnam, but local EV players, such as VinFast, are rapidly growing, in partnership with Chinese EV and battery companies.

Brace for bumpiness

After slightly disappointing 1Q growth, Vietnam’s uneven recovery continues. Exports grew at a double-digit pace, but there has been a divergence among sub-sectors. Inflation concerns have risen, with headline inflation rallying to almost breach the SBV’s 4.5% inflation ceiling in April. Coupled with recent weakness in VND, one may wonder whether the SBV will follow regional peers in hiking. Despite a risk, we do not believe this is likely. We expect the SBV to hold its policy rate steady at 4.5%.

Table 1. Summary of key recent economic indicators

Feb 24

Mar 24

Apr 24

PMI

50.4

49.9

50.3

Exports (% y-o-y)

-5.5

13.0

10.6

Imports (% y-o-y)

0.0

9.0

19.9

CPI (% y-o-y)

4.0

4.0

4.4

Manufacturing IP (% y-o-y)

-4.0

6.8

9.6

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