The two parties signed a memorandum of understanding Friday to enter into a joint venture to make the buses.

According to DATAM, the electric buses will have 17 seats, including a seat for the driver and one for a disabled person. It will be 1.49 meter wide, requiring a lane at least 1.5 meter wide to operate.

These medium-sized 17-seater electric buses will be suitable for narrow roads in HCMC.

DATAM chairman Lee Young-cheol said it was very difficult to expand roads (for a separate lane) to implement a BRT, or bus rapid transit system, given that many HCMC roads are narrow.

A bus rapid transit system tries to improve capacity and reliability relative to a conventional bus system by typically providing separate lanes dedicated to buses, giving priority to buses at intersections where they interact with other traffic, as well as use other measures such as collecting fees at stations to speed up boarding.

Therefore, the solution is to reduce bus sizes so that they are slightly wider than a normal car, and do not take up too much space, he said.

Of the total investment of $525 million, $300 million will be used to produce 20,000 electric buses and $225 million to install solar LED streetlights with AI cameras and free wifi. The system will first be tested on a two-way 30km road, and will cost $10 million.

The South Korean tech company also said the electric buses will cost only 20 percent compared to normal buses. DATAM said that in the long run, it wants to export the electric buses to other Southeast Asian countries as well.

Tran Chi Trung, director of the Ho Chi Minh City Public Transport Management Center, said Ho Chi Minh City has only 44 percent of roads with a width of over 7 meters. The city of 10 million people has 85 percent of them living in alleys, meaning congestion is frequent and it is not easy to organise public transportation.