Vietnam Implements New Preferential Tax Policies for Electric Vehicles and Strategic Imports

On 8 July 2025, the Government of Vietnam issued Decree No. 199/2025/ND‑CP, which amends and supplements Decree No. 26/2023/ND‑CP on the preferential export and import tariff schedule, categories of goods, and absolute/mixed tariff rates. This decree introduces significant new tax incentives for electric and environmentally friendly vehicles, as well as adjustments in preferential duties on several goods categories. It takes effect immediately upon signing.

Incentives for green and electric vehicles

A core feature of Decree 199 is the expansion of preferential import‐tariff eligibility for the auto industry, especially firms involved in the manufacturing and assembly of vehicles using green technologies, such as electric, hybrid, fuel‐cell, biofuel, or natural gas vehicles.

Relaxation of Minimum Production Thresholds

Under the existing Decree 26/2023, companies assembling traditional internal combustion engine (ICE) vehicles must meet strict minimum production volumes to benefit from the 0% tariff rate on CKD parts used in assembly. Decree 199 introduces two new clauses c.3.6 and c.3.7 in Article 8, Clause 3 allowing:

• The quantity of electric, fuel‑cell, hybrid, biofuel‑only, or natural gas vehicles produced within the same review period to be aggregated with ICE vehicle production volumes, enabling qualifying firms to achieve the production thresholds more easily.
• In cases where a company holds more than 35% capital stake in other certified car manufacturing firms, the production volumes across those affiliated enterprises can be combined when calculating eligibility.

This aggregation mechanism acts as a “production boost” for green vehicle makers, opening easier access to the full benefits of zero‐tariff import on components. Customs authorities will issue tariff refunds corresponding to the number of vehicles produced and sold within the incentive review period. Firms failing to report accurately may be subject to tax recovery and penalties.

Strategic Objectives and Industry Impact

These measures are aligned with Vietnam’s broader strategy to promote a green automotive transition, reducing reliance on fossil fuel vehicles and encouraging domestic manufacturing. By lowering cost barriers for firms that incorporate eco‑friendly models, the decree seeks to stimulate investment by both foreign and domestic automakers, including large groups like VinFast, Thaco, Toyota, and Honda.

Industry experts regard the policy as a significant enabler of cost competitiveness. Since imported components remain a large portion of vehicle production costs in Vietnam (often up to 40‑60%), zero‐tariff on parts can reduce production costs substantially, potentially translating into price reductions for consumers in the long run. However, experts also underscore that wider benefits require complementary reforms, such as greater localisation of parts supply, lower logistic costs, and regulatory consistency.

Conclusion and Policy Outlook

Decree 199/2025/ND‑CP marks a significant policy advancement in Vietnam’s vehicle sector transformation. By extending 0% import duties to components of green vehicles and easing minimum production criteria through aggregation provisions, the decree provides a powerful incentive for automakers to accelerate investment in electric, hybrid, and alternative‑fuel vehicles.

Simultaneously, the recalibration of tariffs on select metals and chemicals reflects a balancing of industrial protection, resource preservation, and broader economic strategy. Businesses operating in affected sectors must remain alert to the evolving tariff landscape and carefully manage compliance and reporting obligations.

To fully realise the long-term benefits of Decree 199, both manufacturers and policymakers are encouraged to build upon this foundational policy by prioritising the localisation of automotive supply chains, optimising overall cost structures, and ensuring the issuance of clear and transparent guidance regarding vehicle category thresholds. These efforts will not only strengthen the competitiveness of Vietnam’s automotive industry but also provide greater clarity and confidence for investors and stakeholders participating in the green mobility transition.