Vietnam, a country known for its large number of motorcycles, is experiencing controversy over its electric vehicle policy. The policy bans gasoline-powered motorcycles in certain areas of Hanoi, the capital, and has caused a stir. Honda, which holds an 80% share of the local motorcycle market, must rethink its strategy because most of its models run on gasoline. This sudden policy change could also disrupt daily life for residents.
In July, the Vietnamese government outlined bold measures to regulate gasoline-powered motorcycles in “Prime Ministerial Directive No. 20.” Starting in July 2026, operating gasoline-powered motorcycles within the Inner Ring Road in Hanoi will be banned. The Inner Ring Road spans over seven kilometers and includes the city center, home to government offices, the Japanese embassy, and the historic Old Quarter, a popular tourist destination.
The government plans to gradually expand the prohibited area by 2030. In Ho Chi Minh City, the country’s largest city, measures to promote electrification are also under consideration.
The reason for moving toward electrification is environmental sustainability. Hanoi is one of the most polluted cities in the world, and the government attributes this to the large number of gas-powered motorcycles on the road.
In fact, Vietnam’s motorcycle sales rank second in Southeast Asia, behind only Indonesia. In 2024, the Vietnam Motorcycle Manufacturers Association (VAMM) reported that motorcycle sales reached 2.65 million units, far exceeding car sales of 400,000–500,000 units. Electric motorcycle manufacturers are not included in these statistics, but it is estimated that electric motorcycle sales account for less than 10% of gasoline motorcycle sales.
Honda, the market leader, is the company most affected by the electrification policy. Honda had anticipated a gradual shift toward electrification, so the sudden policy change caught the company off guard. In April, the company launched the “ICON e:,” a low-powered electric motorcycle that does not require a license for students. However, sales had only reached about 600 units by late July. Currently, there are no plans to launch a high-powered model that would serve as the company’s flagship electric motorcycle.
The new policy will benefit domestic manufacturer VinFast, a leader in electric two-wheelers. VinFast sold approximately 70,000 electric two-wheelers in 2024. Although this is only about one-thirtieth of Honda’s two-wheeler sales, VinFast is the largest player in the electric two-wheeler market and continues to grow. The company recently launched two new models and introduced purchase support measures, such as three-year installment plans, to attract customers.
VinFast has a proven track record of increasing EV sales, surpassing Toyota and Hyundai Motor to become the market leader in Vietnam’s four-wheeled vehicle market. Like the four-wheeled market, the policy to promote the electrification of two-wheeled vehicles is expected to support domestic manufacturers in the two-wheeled sector. Some view this as aligning with the Communist Party’s policy of fostering domestic companies.
However, many remain skeptical about the progress of electrification. In Hanoi, for example, many people use motorcycles to commute, and gasoline-powered motorcycles flood the streets during the day, reflecting the public’s strong attachment to them. Charging infrastructure is limited, and many urban apartments prohibit charging electric motorcycles due to fire safety concerns. Power shortages are also severe; Hanoi experienced a blackout on August 4.
The impact on the supply chain is unavoidable as well. For example, Honda has over 130 suppliers in Vietnam and a local parts procurement rate of nearly 100%. The company has a production capacity of 2.75 million units across three factories and approximately 800 certified dealerships nationwide.
In the future, gasoline-powered vehicles are expected to be banned as well. Hybrid vehicles (HVs), a specialty of Japanese manufacturers, are also subject to regulation. These electrification policies will significantly impact citizens’ lives and related industries, and chaos will ensue if the issue is not addressed. Although the Vietnam Automobile Manufacturers Association (VAMM) supports electrification, it has proposed delaying the implementation of regulations, creating uncertainty about whether electrification will proceed as the government intends.
Source: The Nikkei
PSR Analysis: Sudden implementation of difficult-to-achieve government strategies is often seen in Southeast Asia. These strategies often are abandoned midway through, and the plans’ content is revised or left unclear. However, this policy is expected to significantly impact people’s lives, so it should be viewed as having been implemented with determination.
The biggest challenge is developing the corresponding charging infrastructure. Power outages occasionally occur in urban areas, raising concerns about the reliability of the power supply. How will the massive charging needs of vehicles be met?
Although swappable batteries are currently the mainstream solution, meeting demand during rush hour remains a significant challenge.
Japanese manufacturers, led by Honda, have been slow to act. Even if they develop and launch EVs capable of meeting future demand, I’m little skeptical they can compete effectively with established players like VinFast and Chinese manufacturers in terms of pricing. PSR
Akihiro Komuro is Research Analyst, Far East and Southeast Asia, for Power Systems Research
