The Vietnamese Government has officially reduced import tariffs for certain goods, including completely built-up (CBU) automobiles… While this move aims to boost trade and offer greater variety to consumers, it also brings complex implications for Viet Nam’s transport sector and its climate commitments.
The preferential import tariff under Decree 73/2025/ND-CP dated 31/03/2025 applies to countries that are members of the World Trade Organization (WTO) with which Viet Nam has not signed a bilateral or multilateral free trade agreement (FTA), such as the United States, Russia, and Brazil. The Most Favored Nation (MFN) import tariff for certain types of automobiles has been specifically adjusted as follows:
| Type of Automobile | Import Tariff from 31 March | Reduction Rate |
| Sedan with engine displacement > 2.0 liters & < 2.5 liters | 50% | 14% |
| Passenger vehicles (including station wagons) & four-wheel drive sports vehicles with engine displacement > 2.0 liters & < 2.5 liters, excluding sedans and vans | 50% | 14% |
| Four-wheel drive vehicles with engine displacement > 3.0 liters | 32% | 13% |
In addition, under agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Free Trade Agreement with the European Union (EVFTA), and the United Kingdom-Viet Nam Free Trade Agreement (UKVFTA) that Viet Nam has signed, import tariffs on CBU automobiles will gradually be reduced to 0% by 2029–2030. These policies signal a significant decrease in the overall cost of imported CBU vehicles in the coming years.
A Potential Surge in Carbon-Intensive Vehicles
A key concern with reduced import tariffs is the potential influx of larger engine vehicles from markets like the U.S. and Russia, which are associated with higher fuel consumption and greater emissions. This trend could worsen as existing FTAs gradually eliminate tariffs on all CBU vehicles over the next five years, making larger vehicles more affordable and potentially overshadowing fuel-efficient or electric alternatives. The dominance of personal vehicles in Viet Nam’s fleet means this could significantly increase the country’s carbon footprint.
Furthermore, the development of domestic automotive manufacturing, which the government has been keen to foster, could face stronger competition from more affordable imports. This might slow down investments in local production of electric vehicles (EVs) and other cleaner mobility solutions. If incentives for green vehicles are not attractive enough in comparison to the new import tax policy, the number of internal combustion engine (ICE) cars may rise, worsening air pollution and hindering the long-term transition towards a low-carbon transport system.
Catalysing a Shift Towards Sustainable Mobility
Despite the challenges, the evolving tariff landscape can also present opportunities to accelerate the reduction of transport emissions in Viet Nam, provided the government adopts proactive and strategic policies.
Firstly, the increased competition in the automotive market could incentivise manufacturers to introduce a wider range of vehicle options, including more fuel-efficient gasoline and hybrid models, as well as electric vehicles, to remain competitive. could offer Vietnamese consumers more choices in lower-emission vehicles at potentially more attractive price points.
Moreover, the government can implement stricter emission standards for all vehicles, regardless of their origin. This would ensure that even imported vehicles adhere to environmental benchmarks, preventing Viet Nam from becoming a dumping ground for older, more polluting vehicles. Simultaneously, promoting the use of cleaner fuels and investing in research and development of alternative fuels like biofuels and hydrogen can contribute significantly to decarbonizing the transport sector.
Finally, carbon pricing on fuels may incentivise consumers to choose fuel efficient vehicles over more polluting alternatives.
Navigating the Path Forward: Policy Recommendations
To effectively navigate the opportunities and mitigate the challenges presented by the evolving tariff regime, the Vietnamese government could consider a multi-pronged approach:
- Strengthening Regulatory Frameworks: Implement stricter emission standards for all vehicles and enforce regular vehicle inspections to ensure compliance.
- Incentivising Electric Vehicle Adoption and Infrastructure: Provide significant financial incentives for EV and PHEV purchases, including tax exemptions and subsidies, and develop a nationwide network of EV charging stations in urban centers, highways, and residential areas.
- Raising Public Awareness: Conduct public awareness campaigns to educate citizens about the environmental and economic benefits of sustainable transportation choices and ensure transparency by clear energy efficiency labelling.
- Fostering Local Green Manufacturing: Provide incentives and support for domestic manufacturers to invest in the production of electric vehicles and related technologies.
Viet Nam’s tariff reduction roadmap for automobiles reflects its openness to global trade and technology. However, its success in contributing to a greener transport sector will depend on how well it is integrated with environmental regulations and long-term planning. If managed strategically, this shift could be a turning point in Viet Nam’s journey toward sustainable and low-carbon mobility.
