Vietnam Automotive Parts Market Outlook to 2028

Vietnam Automotive Parts Market Overview

• The Vietnam automotive parts market is valued at USD 4,5 billion, based on a comprehensive five-year historical analysis. The market's growth is primarily driven by the increasing demand for automotive manufacturing, driven by local manufacturers like VinFast, and growing consumer demand for both passenger and commercial vehicles. Additionally, rising disposable income and the increasing penetration of electric vehicles (EVs) are key drivers contributing to the expansion of the market, along with government policies that support local production.
• Key cities like Ho Chi Minh City and Hanoi dominate the automotive parts market due to their strategic locations, industrial growth, and proximity to major automobile manufacturing hubs. Vietnam's dominance in the automotive parts industry is influenced by its increasing investments in infrastructure, manufacturing capabilities, and government incentives aimed at encouraging foreign direct investment (FDI). Vietnams free trade agreements have made it a favorable location for global automotive manufacturers seeking to tap into Southeast Asian markets.
• Vietnams automotive industry has benefited from lower tariff barriers, especially under the ASEAN Free Trade Area (AFTA). In 2024, import duties on automotive parts were reduced to 0% for ASEAN countries, encouraging regional trade. However, non-tariff barriers, such as strict customs regulations and certification requirements, still pose challenges for some international manufacturers looking to enter the Vietnamese market. These regulations impact the cost and ease of importing key components, influencing the automotive parts supply chain.

Vietnam Automotive Parts Market Segmentation

• By Product Type: The Vietnam automotive parts market is segmented by product type into engine parts, transmission parts, body & chassis, electrical components, and suspension & braking systems. Recently, engine parts dominated the market in Vietnam under this segmentation due to the increasing demand for fuel-efficient and high-performance engines. This dominance is largely attributed to the rising production of vehicles, especially commercial and electric vehicles, that require advanced engine systems for better fuel consumption and reduced emissions.

• By Vehicle Type: The Vietnam automotive parts market is also segmented by vehicle type into passenger vehicles, commercial vehicles, electric vehicles (EVs), and two-wheelers. Recently, passenger vehicles have dominated the market. The dominance of passenger vehicles is driven by a growing middle class, increasing urbanization, and the demand for personal mobility. Additionally, the Vietnamese government's push for sustainable mobility is boosting the market for EVs, which are forecasted to rise in importance over the coming years.

Vietnam Automotive Parts Market Competitive Landscape

The Vietnam automotive parts market is dominated by a mix of local and global players, with major companies leveraging their technological advancements, manufacturing capabilities, and supply chain efficiencies. Notably, local manufacturer VinFast has emerged as a key player, focusing on electric vehicles and sustainability. Global automotive brands like Toyota, Ford, and Hyundai also have a significant presence, supported by joint ventures and foreign investment. These companies dominate the market by establishing robust distribution networks and by forging partnerships with local manufacturers.

Vietnam Automotive Parts Industry Analysis

Vietnam Automotive Parts Market Growth Drivers

• Rapid Industrialization: Vietnam's automotive industry has expanded due to increasing industrialization. By 2024, the country hosted over 400 industrial parks, primarily supporting automotive part manufacturers. The manufacturing sector contributes 17.4% to the national GDP, and the automotive sector has grown parallel to this expansion. Vietnams government has been promoting industrial parks, with new facilities planned for 2025 to cater to the automotive industry. Additionally, industrial production output is forecast to grow by 7.5% in 2024, further fueling demand for auto parts manufacturing.
• Rising Disposable Income: The surge in Vietnams middle class is a significant driver for the automotive parts market. In 2024, the average household disposable income reached USD 8,000, up from USD 7,200 in 2022. This increase directly affects vehicle ownership rates, with 40 out of every 1,000 households now owning a vehicle, compared to 35 in 2022. As household income rises, demand for both new vehicles and replacement parts is expected to maintain its upward trajectory, spurring growth in the automotive parts sector.
• Government Incentives for Automotive Sector: The Vietnamese government has introduced several policies to promote the domestic automotive industry. As of 2024, manufacturers in the sector are eligible for corporate income tax cuts of up to 10%, and there are import duty exemptions on key machinery and components. The governments Strategy for the Development of Vietnam's Automotive Industry to 2025 aims to increase domestic production, reducing reliance on imports and enhancing local automotive parts manufacturing, a key factor for attracting more foreign investments into the sector.

Vietnam Automotive Parts Market Restraints

• Supply Chain Disruptions: Supply chain bottlenecks have posed a significant challenge to Vietnams automotive parts market. In 2024, shipping lead times for critical components stretched to an average of 30 days, up from 20 days in 2022. These delays were exacerbated by global supply chain disruptions caused by geopolitical tensions and logistics infrastructure constraints. Vietnams ports, such as Hai Phong, have reported handling over 7.5 million TEUs in 2023, struggling to keep pace with rising trade volumes, directly impacting parts availability for manufacturers.
• Fluctuating Raw Material Prices: Vietnams automotive parts industry faces challenges due to volatile raw material prices. Steel prices reached USD 725 per metric ton in 2024, up from USD 645 in 2022, while natural rubber, another critical input, saw a price increase from USD 1,600 to USD 1,850 per metric ton. These price fluctuations have raised the cost of production for auto part manufacturers, who are dependent on these materials for producing key components such as frames and tires, putting pressure on profit margins.

Future Outlook

Over the next five years, the Vietnam automotive parts market is expected to experience significant growth driven by government initiatives to localize production, investments in electric vehicle technology, and a growing emphasis on sustainability. Continuous innovation in automotive technology, such as smart systems and energy-efficient engines, will also play a critical role in market expansion. The increasing demand for aftermarket services, coupled with a rise in automotive exports to Southeast Asian countries, is forecasted to contribute to the robust growth of the industry.

Market Opportunities

• Expansion of Electric Vehicle (EV) Parts: The electric vehicle market in Vietnam is growing, with over 45,000 electric cars on the road in 2024, compared to 20,000 in 2022. This surge in EV adoption is driven by government incentives, such as tax exemptions and grants for EV buyers, along with policies supporting the development of EV charging infrastructure. This creates significant opportunities for local auto part manufacturers, especially in producing specialized components like batteries, electric motors, and charging systems.
• Strategic Partnerships with Foreign Firms: Foreign direct investment (FDI) into Vietnams automotive sector reached USD 1.5 billion in 2023, up from USD 1.1 billion in 2022. Joint ventures between Vietnamese firms and foreign companies, such as the partnership between VinFast and LG for EV battery production, are providing local manufacturers with access to advanced technology and expertise. These collaborations are essential for fostering innovation and increasing the production capacity of domestic firms, which can capitalize on the growing demand for both conventional and electric vehicle parts.