The Vietnamese government is considering extending its current preferential special consumption tax rates on battery electric vehicles (BEVs) until the end of 2030, as it looks to continue supporting the transition away from fossil fuels in domestic transportation.

The recent volatility in fuel prices resulting from the crisis in the Middle East is expected to accelerate the transition to zero-emission vehicles across the Southeast Asian region, with governments now beginning to take action to reduce their long-term dependence on crude oil imports from the Middle East.

Currently, special consumption tax rates for battery-powered vehicles with up to 24 seats, introduced in 2022, range between 1% and 4%. These rates are scheduled to increase to between 4% and 11% from February 2027, according to local reports. This compares with the 10% to 150% tax rate applied to internal combustion engine (ICE) vehicles.

In a National Assembly draft resolution, the Ministry of Finance has proposed extending the current BEV tax rates until the end of 2030, with the special consumption tax rate on battery-powered passenger vehicles with up to nine seats kept at 3% in this period, rising to 11% in 2031. The tax rate for vehicles with between 10 and 16 seats would be kept at 2%, rising to 7% in 2031, while the rate on vehicles with between 16 and 24 seats would be kept at 1%, later rising to 4%.

Vietnam has the largest BEV market in Southeast Asia, with domestic vehicle manufacturer VinFast Auto alone delivering more than 175,000 units to domestic customers last year.