VinFast may resolve Vietnam’s automotive industry paradox

VinFast may be addressing a long-standing “chicken and egg” paradox within Vietnam’s automotive industry. For years, the sector has struggled because low vehicle production volumes make it difficult to develop a robust supporting industry, while the lack of a strong supporting industry prevents cost optimization and price reductions.

According to research cited by the World Bank, production scale significantly impacts the economic efficiency of localization. To achieve profitability with a localization rate below 50%, a model typically requires an annual production of approximately 20,000 units. To increase localization beyond 50%, production must exceed 50,000 units per year.

As VinFast increases its output scale, it provides the concentrated demand necessary for component suppliers to justify large-scale investments in specialized machinery, technology, and human resources. This growing demand is seen as a potential catalyst for developing the domestic supply chain in Vietnam.