Vietnam moves closer to 60% domestic content in EVs, targets 80% with locally produced battery cells by 2026

The question of a truly domestically made automobile industry has found an answer in Vietnam’s evolving electric-vehicle production model. With localization at around 60% and moving toward 80% as battery cells made in Vietnam from VinFast come online, Vietnam is expected to come closer to Thailand’s localization levels.

Cause: A shift from assembly to autonomous manufacturing

VinFast has taken a different approach to developing the sector. Instead of focusing on an assembly path, the company built a highly automated production hub from the start, covering steps from research and development to stamping, welding, painting, engine production, and progressively mastering core technologies. This strategy is intended to support a transition from “dependent manufacturing” to “autonomous manufacturing,” with VinFast positioned as a nucleus in the production chain that connects and leads a network of suppliers.

Development: Localization targets and market scale

Mr. Le Khac Hiep said market scale is the decisive factor. In 2025, VinFast delivered more than 175,000 vehicles and became the number one car brand in Vietnam, creating a platform for the development of the supporting industry. The scale of the market is described as providing the basis for investment efficiency across the supply chain, enabling suppliers to invest in production lines, technology, and human resources. As a core enterprise, VinFast is said to create enough “pull” to convert market demand into momentum for the wider supply chain.

VinFast’s localization strategy is central to this process. By 2025, the localization rate of electric vehicles reached about 60%, with a goal of 80% when battery cells are produced in Vietnam in 2026.

Localization comparison across Southeast Asia

• Thailand: localization rate averages 80–90%
• Indonesia: domestically assembled vehicle localization about 60–80% depending on model
• Malaysia: around 65–70%

With the current 60% figure, VinFast is described as being close to catching up with the average localization capacity of Indonesia and Malaysia.

Impact: Higher quality and stronger supplier capabilities

According to Mr. Hiep, VinFast’s impact on the supporting industry is most visible in quality improvements. For years, firms with mechanical and electronic capabilities did not invest due to an unstable market. VinFast is said to have created certainty through long-term, large-scale contracts. When orders are stable, domestic firms can invest in machinery, upgrade technology, and expand production—seen as a prerequisite for building genuine industrial capabilities.

Participation in VinFast’s supply chain also requires suppliers to upgrade comprehensively in technical standards, quality management, and sustainability criteria. This is described as helping suppliers meet VinFast’s requirements while also improving their competitiveness to participate in other global value chains.

Reported results from a domestic partner

A domestic partner that has worked with VinFast since 2017 reported that its asset base increased 12-fold after seven years in the supply chain.

Analysis: Cluster formation and cross-sector spillovers

VinFast is also described as a catalyst for forming clusters of supporting industries. Through large-scale supplier-connect programs, VinFast provides a platform for domestic firms to meet, cooperate, and join the value chain. This is presented as a key factor in developing specialized clusters that support industrialized economies.

Beyond automotive, VinFast’s growth is said to drive demand from related sectors including precision mechanics, electronics, materials, logistics, and energy, creating cross-sector spillovers. VinFast’s production centers in Haiphong and Hà Tĩnh are described as new growth poles that attract labor, capital, and infrastructure development.

Internationally, VinFast’s participation in global markets is said to bring international standards into the domestic supply chain, creating positive pressure for Vietnamese firms to upgrade capabilities and deepen integration into global value chains.

Challenges and outlook

Despite these developments, Mr. Hiep noted that forming economic linkages and developing the supporting industry still faces challenges. Domestic firms’ capabilities are not uniform, particularly in high-tech fields, and capital and R&D investment requirements are large. Competition from international suppliers is also intensifying as Vietnam continues to open its market.

He emphasized the need for a coordinated approach in which the state, leading enterprises, and the education system work together to upgrade the entire ecosystem.