Vietnam Extends EV Special Consumption Tax Break at 1-3% Until 2030

Overview

Vietnam’s National Assembly on April 24 passed a law extending the special consumption tax (SCT) exemption for electric vehicles (EVs) under 24 seats at rates of 1-3% until the end of 2030. From 2031, SCT rates will increase 3.5-4 times, with passenger EVs under 9 seats rising from 3% to 11%. The policy provides regulatory certainty for VinFast (VFS) and other domestic EV manufacturers, supporting the country’s green transition and EV adoption targets.

Key Facts

• The National Assembly passed the law on April 24 with over 93% of attending deputies voting in favor.
• SCT for EVs under 9 seats remains at 3% until end-2030, then rises to 11% from 2031 (3.7x increase).
• For EVs with 10-16 seats, SCT stays at 2% until 2030, then increases to 7% (3.5x).
• For EVs with 16-24 seats, SCT is 1% until 2030, then 4% (4x).
• For electric van trucks and pickups, SCT remains 2% until 2030, then 7% (3.5x).
• The government cited China’s $903 billion EV support over three years and US/EU subsidies of $5,000 per EV as benchmarks.
• BloombergNEF’s Electric Vehicle Outlook 2025 reported Vietnam’s EV sales surged from under 10,000 units in 2022 to over 100,000 in 2024.

What Happened

On the morning of April 24, Vietnam’s National Assembly approved amendments to several tax laws, including the extension of SCT preferences for electric vehicles under 24 seats. The law maintains current SCT rates of 1-3% through 2030, after which rates will increase by 3.5 to 4 times starting in 2031. The government’s report before the vote stated that extending the policy to end-2030 helps citizens transition to greener vehicles and allows businesses to plan medium- and long-term investments in production lines, product development, charging infrastructure, and localization.

The government also noted that Vietnam currently lacks a comprehensive EV support mechanism, contrasting with China’s $903 billion in EV industry support over three years and subsidies of $5,000 per EV in the US and EU. The extension is expected to help Vietnam meet international commitments on greenhouse gas emissions and carbon credits.

Market Context

VinFast (VFS), listed on the Nasdaq, is Vietnam’s leading EV manufacturer and the primary beneficiary of this policy extension. The company has been expanding its domestic and international presence, including a factory in North Carolina. The tax clarity supports VinFast’s long-term investment plans in Vietnam, where it faces competition from imported EVs and domestic combustion-engine vehicles. The broader Vietnamese EV market has grown rapidly, with sales increasing more than tenfold from under 10,000 units in 2022 to over 100,000 in 2024, according to BloombergNEF.

Strategic Significance

The extension of SCT preferences through 2030 provides a stable regulatory environment for VinFast and other EV makers to invest in production capacity, charging infrastructure, and R&D. The gradual phase-in of higher taxes from 2031 allows a transition period, reducing the risk of a sudden demand shock. For long-term investors, the policy signals the government’s commitment to EV adoption and green transportation, aligning with global trends. However, the eventual tax increase may pressure margins and pricing, making cost competitiveness and localization critical for VinFast’s profitability.

What to Watch

• VinFast’s Q2 2025 earnings report for commentary on production plans and margin impact.
• Any additional government incentives for EV buyers or charging infrastructure.
• Competitive response from traditional automakers and new EV entrants in Vietnam.
• Progress on VinFast’s North Carolina factory and international expansion.
• EV sales data for Vietnam in 2025 to gauge demand elasticity under current tax rates.