Vietnam’s three major domestic automotive corporations - Thaco, VinFast and TC Group - have urged the government to maintain automobile manufacturing, assembly and import activities within the list of “conditional business sectors,” warning that deregulation could weaken the country’s long-term industrial strategy and expose local producers to unfair competition.

The pushback comes as the Ministry of Finance drafts proposals to simplify business conditions, including removing automobile manufacturing, assembly and importation from the list of conditional investment sectors.

In their petitions sent to the Prime Minister and relevant ministries, the automakers argued that the auto industry is a foundational manufacturing sector with broad spillover effects on employment, industrial development and public safety.

VinFast auto manufacturing line. Photo courtesy of Lao Dong (Labor) newspaper.

Thaco said the existing requirements, such as standards for factories, assembly lines, warranty systems, and spare parts supply, should not be viewed as administrative barriers, but as safeguards ensuring product quality and long-term consumer protection.

The company argued that automobiles are high-value products with long life cycles and complex technical requirements, making after-sales support, recalls and maintenance capabilities essential.

VinFast, the EV arm of Vingroup (HoSE: VIC) echoed similar concerns, saying technical and infrastructure requirements reflect the seriousness and long-term commitment of manufacturers. The EV maker warned that removing licensing requirements could allow underqualified importers or assemblers to enter the market, potentially increasing risks for consumers.

The company also emphasized that domestic manufacturers have spent years investing heavily in factories, technology, supply chains, and workforce development.

Meanwhile, TC Group argued that abolishing business conditions entirely would create an uneven playing field between companies investing in local manufacturing and firms focused mainly on imports.

The firm said that lower entry barriers for importers could disadvantage manufacturers pursuing long-term localization strategies in Vietnam.

The Ministry of Industry and Trade has previously raised similar concerns. The ministry warned that loosening current rules could encourage businesses to import nearly complete vehicle bodies for simple assembly in Vietnam, undermining local content development and the supporting industries ecosystem.

The ministry also cautioned that foreign manufacturers, particularly from neighboring China – where auto production overcapacity remains high, could shift excess capacity into Vietnam through low-value assembly operations aimed at circumventing origin rules for exports.

Such practices, officials warned, could expose Vietnam to trade remedy investigations and punitive tariffs from other countries.

VCCI backs deregulation

In contrast, the Vietnam Chamber of Commerce and Industry (VCCI) has supported removing the sector from the conditional business list, arguing the current framework duplicates existing technical oversight mechanisms.

VCCI said all domestically produced and imported vehicles already undergo mandatory inspections for technical safety and environmental compliance before entering the market. Additional protections, including recall systems and consumer protection laws, provide sufficient post-market oversight.

The agency argued that licensing requirements and mandatory authorized service networks create high market-entry barriers that concentrate the import market among a small number of major players, contributing to high vehicle prices in Vietnam compared with other ASEAN countries.

VCCI also noted that despite more than two decades of protective policies, Vietnam’s passenger vehicle localization rate remains only around 7-10%, far below Thailand’s 70-80%.

According to the agency, this suggests entry barriers alone have not effectively promoted localization. Instead, targeted incentives for locally produced components, R&D and supporting industries would likely be more effective.

It further argued that current regulations were designed around traditional internal combustion vehicle manufacturing and may no longer suit emerging sectors such as electric and autonomous vehicles.

Citing practices in the United States, European Union, Japan, and South Korea, VCCI noted these markets rely on technical standards, product liability, and recall systems rather than licensing-based production approvals.

Vietnam’s automotive industry currently contributes more than 3% of GDP and directly employs around 200,000 skilled workers in vehicle manufacturing and supporting industries. Domestic output has risen from roughly 324,000 vehicles in 2020 to more than 500,000 units in 2025, accounting for an estimated 65-75% of total vehicle sales nationwide.