Vietnam’s homegrown electric vehicle (EV) manufacturer is finding its footing in the United States market, amid growing Sino-US contestation and curbs on Chinese access to the US market. VinFast stands out as a good example of how Southeast Asian companies are expanding their global influence and helping the US achieve its climate change goals. But it remains to be seen whether other Southeast Asian companies will follow and take the same path.
VinFast became the first foreign manufacturer – and the first from Southeast Asia – to enter the US EV market, dominated by companies like Tesla, BMW and Nissan. Vinfast made headlines in 2022, when it announced plans to build its first overseas assembly plant in Chatham County, North Carolina, about a half hour’s drive from Raleigh. With US$1.25 billion in state incentives, VinFast plans to build its nearly 800,000-square-foot manufacturing facility aimed at producing low-cost EVs that could out-compete pricier US options. VinFast’s VF3 model is expected to retail around US$20,000, less than half the average cost of a new EV in 2024.
This price aligns with the US government’s strategy to mitigate climate emissions by incentivising household behaviours. These demand-side efforts involve subsidies and other policies that produce competitive pricing for low-carbon goods. The Infrastructure Investment and Jobs Act (IIJA) and the 2022 Inflation Reduction Act (IRA) provide more than US$40 billion to encourage American consumers to adopt clean energy technologies like EVs and help the country meet its goal to reduce emissions 50 to 52 per cent below 2005 levels in 2030. Vanderbilt University researchers found that individual actions, though comprising only 5.7 per cent and 12 per cent of the two statutes’ funds, could contribute 40 per cent or more of the legislations’ total carbon dioxide reductions.
Beyond individual incentives, the IIJA and IRA have recentered US climate strategy on industrial policy. Global automakers have committed US$312 billion to US EV manufacturing, with 66 per cent announced since the IIJA’s passage. Despite these outlays, US auto manufacturers will be playing catch up with many foreign competitors, namely those in China. Chinese manufacturers accounted for 60 per cent of global EV sales in 2023, and have already captured commanding shares of the global EV market. In response to China’s dominance in EVs and reflecting escalating geopolitical tensions and economic competition between the US and China, the IRA aims to boost US competitiveness in clean energy technologies, including EVs, while limiting China’s access to the US market. The IRA notably features domestic content requirements for EVs to qualify for tax credits, mandating that critical minerals, batteries and other manufactured components be sourced from the US or its free trade agreement partners.
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Southeast Asia has barely factored in the upcoming US presidential election…Neither candidate has articulated a Southeast Asia engagement strategy.
These protectionist provisions open the door for VinFast to be the foreign EV manufacturer of choice for American consumers demanding low-cost EVs. Meanwhile, partnerships with Southeast Asian companies like VinFast offer vehicles (pun intended) for accelerating US progress towards its decarbonisation and climate change goals that circumvent an increasingly contentious relationship with China. In addition to IRA tax credits, states like California are providing state-level rebates specifically for VinFast EVs, providing an on-ramp for the Vietnamese company to enter the US’ largest state’s EV market.
Beyond the environmental implications of a shift to clean technology, American workers would benefit from the job creation and economic spillover effects associated with VinFast’s planned expansion in North Carolina. Research shows that for every motor vehicle manufacturing job created, about 14 indirect jobs are generated through the demand for suppliers and spending in the local economy.
While VinFast may be one of the first Southeast Asian companies to explore a foothold in the US market, it highlights the untapped potential for deeper economic engagement between the two regions. More Southeast Asian companies, like Vietnam’s VNG Corp and a handful of energy and mineral companies in Indonesia, are exploring opportunities to deepen engagement with the US. Yet, Southeast Asia has barely factored in the upcoming US presidential election. This “attention deficit” is hardly surprising given the US’ recent populist turn towards domestically-focused issues like inflation, democracy, and economic issues, which have predictably dominated presidential discourse. Neither candidate has articulated a Southeast Asia engagement strategy.
The next US administration has a crucial opportunity, and indeed an obligation, to prioritise engagement with Southeast Asia. By emphasising strategic, mutually beneficial partnerships, the US can reassert itself as an essential ally, one that is more trusted and preferred over China. But it will not be easy. Although VinFast’s affordable EVs might contribute to the US’s decarbonisation, investments by a few Southeast Asian companies alone are not enough to significantly strengthen US engagement with the region. The 2024 State of Southeast Asia Survey indicates the region’s shifting away from the US and toward China as a preferred partner. A slim majority of respondents (50.5 per cent) now favour China over the US, compared to 61.1 per cent favouring the US in 2023.
Given the dire urgency of the climate crisis, which recently left its devastating mark in North Carolina via Hurricane Helene, the US, as the world’s second largest emitter of greenhouse gas emissions, must pursue win-win climate solutions. The IRA and IIJA are important bipartisan frameworks that advance clean energy technologies which, regardless of electoral outcomes, will improve the lives and livelihoods of Americans who benefit from the resulting clean air and reduced emissions. As Southeast Asian nations expand their reach on the global stage, with VinFast as a prime example of this increasing influence, these countries will prove to be important allies to the US and players in the global energy transition.
Angel Hsu is an associate professor of public policy and environment at the University of North Carolina at Chapel Hill. She is currently a Wang Gungwu Visiting Fellow at ISEAS – Yusof Ishak Institute.
This article was first published on Fulcrum, ISEAS – Yusof Ishak Institute’s blogsite.
