VinFast's catalytic role in developing economic linkages, supporting industries in Vietnam

The emergence of VinFast has been widely regarded by experts as a significant turning point. The importance lies not merely in the addition of another automaker, but in a fundamentally different approach to industry development, writes Le Khac Hiep, vice chairman of Vingroup under which VinFast is an electric vehicle arm.

Over the past 40 years of Doi moi (reform), Vietnam’s economy has undergone a profound transformation - from an agriculture-based system to one increasingly driven by industrialization and global integration.

Yet throughout this journey, a fundamental question has persisted: when will Vietnam develop sufficiently strong endogenous manufacturing capabilities to drive long-term growth and integrate deeply into global value chains?

The automotive industry, with its high level of integration and complex technological requirements, serves as the clearest test of such capabilities. For many years, Vietnam’s auto sector largely remained at the assembly stage, characterized by low localization rates and heavy dependence on external supply chains.

Domestic firms struggled to participate deeply in the value chain due to constraints in technology, capital, and market scale. As a result, the industry existed in an incomplete structure - possessing consumer demand but lacking a robust supporting industrial base capable of generating sustainable value-added.

Against this backdrop, the emergence of VinFast has been widely regarded by experts as a significant turning point. The importance lies not merely in the addition of another automaker, but in a fundamentally different approach to industry development.

Rather than following the traditional assembly model, VinFast chose from the outset to build a highly automated, fully integrated manufacturing complex, encompassing everything from research and development to stamping, welding, painting, engine production, and the gradual mastery of core technologies.

This approach lays the foundation for a shift from “dependent manufacturing” to “self-reliant manufacturing.” More importantly, VinFast has not developed as a standalone entity but has positioned itself as a central node within a broader production network connecting and leading a system of suppliers. This strategy has begun to restructure Vietnam’s automotive industry toward the formation of domestic economic linkages.

A decisive factor in this process is market scale. In 2025, VinFast delivered more than 175,000 vehicles in Vietnam, maintaining its position as the number one automotive brand in the domestic market. This figure represents not only a sales milestone but, more importantly, a foundational condition for the robust development of supporting industries.

When market output reaches a sufficient scale, it creates the economic basis for investment efficiency within the supporting industrial chain. At that point, suppliers are more willing to invest deeply in production lines, technology, and human resources. As the anchor firm, VinFast has generated a strong pull effect, transforming market demand into a growth driver for the entire supply chain.

Building on this scale, VinFast’s localization strategy plays a pivotal role. By 2025, the localization rate for its electric vehicles had reached approximately 60%, with a target of 80% by 2026 when battery cells are expected to be produced domestically. Mastery of core technologies enables the company to control its value chain, reduce external dependence, and create space for deeper participation by domestic firms. When a lead firm like VinFast holds core technologies, the broader ecosystem can develop alongside it, generating spillover effects similar to those observed in established industrial economies.

VinFast’s impact on supporting industries is most evident in qualitative transformation. First, it addresses the output problem for domestic firms. For years, many companies with capabilities in mechanical engineering and electronics hesitated to invest due to the lack of stable demand. VinFast has provided that assurance through large-scale, long-term partnerships. With stable orders, firms can confidently invest in machinery, upgrade technologies, and expand production - prerequisites for building genuine industrial capacity.

At the same time, participation in VinFast’s supply chain - one oriented toward global markets - requires suppliers to upgrade comprehensively in technical standards, quality management, and sustainability criteria. This process not only enables them to meet VinFast’s requirements but also enhances their competitiveness in other international value chains.

The results are increasingly visible. At a localization workshop held at VinFast’s Hai Phong factory in late 2024, the owner of a domestic firm specializing in body and door stamping - partnering with VinFast since 2017 - reported a 12-fold increase in asset scale after seven years of participation in the company’s supply chain. This example illustrates the tangible benefits generated by a supply chain led by VinFast.

In addition, VinFast has acted as a catalyst in the formation of supporting industry clusters. Through large-scale supplier connection programs, the company has created a platform for domestic firms to meet, collaborate, and integrate into the value chain. This is a critical factor in developing specialized industrial clusters, which have been a cornerstone of success in advanced industrial economies.

The formation of such clusters not only optimizes costs but also facilitates technology sharing, enhances production efficiency, and builds collective competitiveness. Parallel support policies - including infrastructure incentives, technical assistance, and financial connectivity - have further lowered barriers to entry, particularly for small and medium-sized enterprises.

VinFast’s influence extends beyond the automotive sector to the broader economy. Its growth generates demand across multiple related industries such as precision engineering, electronics, materials, logistics, and energy - creating multi-sector spillover effects. VinFast’s manufacturing hubs in Hai Phong city and Ha Tinh province have become new growth poles, attracting labor, capital, and infrastructure development.

At the international level, the company’s participation in global markets brings international standards into the domestic supply chain, creating positive pressure for Vietnamese firms to upgrade capabilities and integrate more deeply into global value chains.

Nevertheless, the process of building economic linkages and developing supporting industries continues to face challenges. The capabilities of domestic firms remain uneven, particularly in high-tech segments. Capital requirements and investment in research and development are substantial. Competition from international suppliers is intensifying as Vietnam further opens its economy. Addressing these challenges requires a coordinated approach in which the government, leading enterprises, and the education and training system work closely together to upgrade the entire ecosystem.

As Vietnam enters a new phase of development centered on green growth and high-tech industries, VinFast is expected to serve as a key driver in advancing manufacturing and supporting industries. The country is gradually moving toward greater control over its value chains. From these initial steps, a competitive industrial foundation for long-term growth is taking shape.

With an expanding market scale, a clear localization strategy, and a leading role in ecosystem development, VinFast has contributed to building deeper economic linkages - laying the groundwork for Vietnam to progressively establish its position within global value chains.