VinFast, Viet Nam’s first domestic car company and electric vehicle manufacturer, accounts for 45% of electric vehicle battery production in the country. Photo credit: ADB.
Low costs, access to raw materials, and proximity to markets make the country an ideal production site.
Viet Nam has the potential to become a major producer of lithium-ion batteries, which are used to power mobile devices and electric vehicles. A study supported by ADB suggests that the country can realize significant socioeconomic benefits from developing the battery value chain —from raw material extraction to recycling.
Investments related to lithium-ion batteries in Viet Nam total $7 billion to date, creating some 65,000 jobs. The study by consulting firm Roland Berger estimates that increasing investments by $3 billion–$9 billion will result in 22,000–65,000 new jobs.
Global demand for electric batteries is rising as the shift to electric vehicles accelerates. The International Energy Agency (IEA) says electric cars are on track to grow its global market share to over 25% this year and more than 40% by 2030 as more affordable models become available. Lithium-ion batteries are also widely used as energy storage systems to capture electricity, particularly from renewable sources.
Competitive advantage
According to the study, several factors make Viet Nam an ideal production base for lithium-ion batteries in Southeast Asia. It has low manufacturing costs, access to domestic raw materials, and a strategic location in terms of proximity to resource-rich countries and major markets. It has significant nickel reserves, and it is one of the world’s largest producers of phosphate. Both are critical materials for the lithium-ion battery industry. The country can import lithium from Australia and other raw materials from the People’s Republic of China.
The study sees Viet Nam’s potential to become a regional exporter of lithium iron phosphate batteries to Asia and the Pacific and North America. This is the type of battery most widely used in electric vehicles.
“Achieving this will require clear government incentives and policies, such as explicit BEV [battery electric vehicle] production targets to attract foreign direct investment, measures to boost local BEV manufacturing, and corporate income tax exemptions to encourage domestic battery production,” the report says.
The local electric battery industry is still at an early stage of development. VinFast, Viet Nam’s first domestic car company and electric vehicle manufacturer, accounts for 45% of electric vehicle battery production. The market for electric vehicle batteries is small but growing fast. The country is accelerating electric vehicle adoption as one of the measures to decarbonize the transport sector, a major source of greenhouse gas emissions. The demand for battery energy storage systems is also expected to increase as the country scales up its capacity for renewable energy.
Another key advantage is that Viet Nam’s workers have “the foundational skills needed for LiB [lithium-ion battery] industry jobs, with no major skills gaps identified,” notes the study. “However, sustained collaboration among industry players, academia, and the government will be essential to build critical capabilities and align education programs with evolving industry needs. Increasing workforce diversity will be crucial to broaden the talent pool and reduce the risk of future labor shortages in this fast-growing sector.” As the industry expands, the demand for engineers, researchers, business analysts, and data scientists to support research and development will increase.
Sustainability challenges
Battery recycling, repurposing, and reuse are important in ensuring the sustainability of battery production. Across the world, manufacturers are increasingly being required to be responsible for end-of-life management of batteries. The production of lithium-ion batteries is energy-intensive and a source of carbon dioxide emissions. The mining of critical minerals also poses environmental, social, and governance risks, which makes the recovery of valuable materials from spent batteries critical.
In the case of Viet Nam, the study finds that battery recycling facilities may not be economically feasible in the near term because of the high capital requirements and limited feedstock from the domestic market. “Partnering with recycling facilities in the region may fast-track the country’s entry into the LiB recycling market,” the report says. It suggests cooperation initiatives with other member-states of the Association of Southeast Asian Nations (ASEAN) and Greater Mekong Subregion, which could include facilitating the cross-border movement of end-of-life batteries, harmonizing regulations on recycling, and collaborating on research and development. These would expand regional recycling capacity as well as improve cost efficiency.
ASEAN already has an existing agreement to explore cooperation and collaboration on the development of a regional electric vehicle ecosystem, which includes batteries.
The study was conducted as part of ADB’s strategic support for Viet Nam’s clean and sustainable energy solutions. ADB is also providing technical assistance for the development of diversified and responsible critical minerals and clean energy technology manufacturing supply chains to Viet Nam and other developing member countries. In addition, it is exploring regional collaboration mechanisms to further develop ASEAN’s critical minerals manufacturing value chains, such as a regional financing facility and platforms for data sharing and market integration.
