VinFast growth and Hyundai-Kia-Toyota expansion position Vietnam as a new Southeast Asian car manufacturing hub, but two major challenges remain

Building a sustainable industrial value chain, moving beyond the assembly stage to master from raw materials to finished products, will be key to elevating the global competitiveness of Vietnam’s automotive sector.

On April 9, the Ministry of Industry and Trade held a Policy Dialogue with Korean companies in the auto parts sector, bringing together regulators, associations and business communities from both countries.

Vietnam–Korea cooperation and investment scale

Speakers included Vu Ba Phu, Director of the Trade Promotion Agency under the Ministry of Industry and Trade; Koo Bon Kyung, CEO of KOTRA Southeast Asia & Oceania; and Nguyen Khac Quyen, Deputy Director of the Institute for Strategic Studies, Policy on Industry and Trade under the same ministry.

The forum also included representatives from provincial departments, associations, industry clusters, industrial zones, Vietnamese enterprises, foreign-invested Korean firms and other stakeholders.

Vu Ba Phu said Vietnam–Korea economic, trade and investment cooperation has developed rapidly and comprehensively in recent years, with Korea remaining a leading partner, particularly in foreign direct investment.

As of the end of February 2026, Korea was Vietnam’s largest foreign investor, with total registered capital of over $95.2 billion, about 18% of total registered investment. In the first two months of 2026, Korean capital reached nearly $2 billion, accounting for 32.7% of total registered capital, which he said signals confidence and stable expansion.

He noted that the manufacturing and processing sector accounted for more than 73% of total investment from Korean firms, forming a foundation for developing Vietnam’s automotive supply chain, including component and parts manufacturing.

Industrial clusters and technology transfer

According to Vu Ba Phu, the presence of Korean companies has helped raise production capacity, accelerate technology transfer, and improve governance and quality standards in Vietnam. He said automotive supporting-industry ecosystems have formed in key localities including Bac Ninh, Thai Nguyen, Hai Phong, Hung Yen and Ho Chi Minh City.

He added that as the global automotive industry shifts toward green, electrification and smart technologies, these investments have economic significance while also helping Vietnam enhance internal capacity and participate more deeply in the global value chain.

Remaining bottlenecks in domestic content and supply-chain linkage

Despite positive outcomes, Vu Ba Phu highlighted limitations. He said Vietnam’s domestic content ratio remains low, technological capability and quality standards are not high, and the ability to participate deeply in the global supply chain is limited.

He also pointed to insufficient linkage between Vietnamese enterprises and Korean FDI firms compared with potential. Many domestic companies, he said, still operate outside large supply chains due to technology, governance and product standard barriers.

From Korea’s perspective, Koo Bon Kyung said the Vietnamese auto market is growing strongly, with 2025 sales up more than 10% year-on-year. He said the development of domestic players such as VinFast, alongside manufacturing expansion by global groups including Hyundai-Kia and Toyota, is helping Vietnam become a new automotive production hub in Southeast Asia.

However, he noted that alongside rapid scale growth, Vietnam’s industry still faces major challenges in the domestic content rate of components and in improving the supply chain for materials and key components.

“Building a sustainable industrial value chain, moving beyond assembly to control from raw materials to finished products, will be the key to raising the global competitiveness of Vietnam's automotive industry,” emphasized Mr. Koo Bon-kyung.

Proposed solutions and policy direction

To address these bottlenecks, participants exchanged and proposed solutions to promote more substantive cooperation. The focus was on strengthening two-way business connections in the automotive parts supply chain and encouraging investment in research and development (R&D), technology innovation and knowledge transfer in Vietnam.

Vu Ba Phu proposed that cooperation mechanisms and policies continue to be refined toward transparency, stability and easier operation for investment and manufacturing activities. He said development direction should also align with green, sustainable criteria consistent with global supply-chain shifts.

“With the foundation of good cooperative relations between the two countries and the initiative of the business community, Vietnam–Korea cooperation in the automotive parts sector is expected to move to a new, deeper, more effective and more sustainable phase. It will not be limited to attracting investment; the broader goal is to build an advanced ecosystem with deeper production capabilities, increasing Vietnam's self-reliance and affirming its position in the global automotive value chain,” emphasized Mr. Vu Ba Phu.

VinFast value chain mapping initiative

The dialogue also referenced the VinFast value chain map project, a collaborative initiative between KOTRA, the Trade Promotion Agency and the Ministry of Industry. The project aims to provide a comprehensive view of supply-chain structure, clarify the role and participation of enterprises at each stage, and help regulators and the business community identify bottlenecks and gaps to be filled.

Organizers said it is intended to serve as a crucial tool for guiding policy and strategic development of the sector in the coming period.