At that point, it’s no longer about cutting red tape but a decision on whether to save the domestic auto industry or let it go.
At that point, the issue is no longer administrative reform, but whether Vietnam still wants to preserve an automotive industry at all.
Since March 31, 2025, Vietnam has sharply reduced import tariffs on certain automobile models under the MFN (Most Favored Nation) mechanism, cutting rates from 64 percent to 50 percent, and even to 32 percent for some US vehicle lines.
The move has been viewed as a necessary adjustment in trade relations, especially with markets such as the US, which still holds only a limited position in Vietnam.
However, this does not stop with the US.
With EVFTA, Vietnam has also committed to opening the automobile market, but in a very different way: import taxes are not eliminated immediately but according to a roadmap lasting a maximum of 9–10 years after 2020, depending on each car line, in which passenger cars with large displacement take about 9-10 years. This is clearly a long and controlled roadmap, not an instant opening.
At the same time, earlier opening is applied to many spare parts to support domestic production. More importantly, EVFTA does not force Vietnam to abandon technical management tools.
An official who was once part of the EVFTA negotiation team told VietNamNet that, following the market-opening commitments mentioned above, requirements for safety standards, warranty, recalls, or business conditions can still be maintained, as long as they are applied transparently and without discrimination.
In other words, international trade commitments are opening markets through tariffs, not requiring the removal of all “technical barriers.”
The question is why Vietnam is dismantling additional regulatory tools that were originally designed to ensure market accountability, protect consumers, and safeguard an industry that is still in the process of maturing.
Technical barriers
For many years, Decree 116 was not merely a regulatory document, but effectively a mechanism to “anchor” responsibility.
To import automobiles, businesses had to obtain licenses; and to secure those licenses, they had to prove they had qualified warranty facilities and official authorization to conduct recalls.
Those provisions, which might appear procedural on the surface, in practice created a closed control loop in which market entry is tied to both capability and long-term responsibility.
For businesses, that meant costs. But for policymakers, it is a way to ensure that a high-value, high-risk product such as an automobile could not enter the market without a mechanism for accountability attached.
An automobile manufacturer told VietNamNet that while it supports reform, it is concerned that some proposed cuts from the Ministry of Industry and Trade did not align with market realities.
According to the company, requirements regarding factories, production lines, or testing tracks are not simply administrative barriers, but minimum technical standards necessary to ensure product quality and demonstrate a company’s serious investment commitment.
What concerned them is not competition itself, but the nature of that competition.
If shifting entirely to post-inspection, companies lacking sufficient capability could still enter the market, while risks related to traffic safety and the environment might only be detected after incidents occur.
Vietnam’s automobile industry has been developing with annual production and assembly output surpassing 500,000 vehicles, accounting for around 65-75 percent of the domestic market, with about 650 companies participating in the value chain, creating jobs for roughly 200,000 workers and contributing more than 3 percent of GDP.
Yet behind those growth figures lies a reality: the localization rate for passenger cars remains modest, still hovering around 20 percent after two decades of protection.
Opening the market?
Perhaps the issue is not whether to protect the industry, but how to protect it: if existing protection measures have been ineffective, then the method of protection should be revised.
In that context, opening the market on both fronts – tariffs and technical requirements – could create a much larger shock than anticipated.
As completely built-up vehicles from major manufacturing hubs flood in with advantages in scale and cost, domestic assembly lines would face direct competitive pressure, while supporting industries would lose room to develop.
A market can be opened, but an industry cannot simply be rebuilt from scratch.
Tu Giang