Vietnam's Path to Sustainable Fleet Management: Electrification in Focus

Introduction

Vietnam, a nation marked by its rapid economic growth and strategic importance in Southeast Asia, encounters distinctive challenges in corporate fleet management. The country's economic dynamism, coupled with its commitment to sustainability, necessitates a strategic approach to fleet management that balances efficiency with environmental considerations.

Geographic and Infrastructure

Vietnam's geography, with its lengthy coastline and strategic location bordering China, Laos, and Cambodia, significantly influences its transport and logistics sector. The country's road network is pivotal for domestic and international trade, yet faces challenges such as congestion in urban areas and varying road conditions across regions. Adapting fleet management strategies to navigate these geographic and infrastructural variances is crucial for operational efficiency.

Economic

Vietnam's economy has shown remarkable resilience and growth, with the World Bank reporting a GDP of $408.80 billion in 2022. The country experienced an economic slowdown with growth decreasing to 3.7% in the first half of 2023 but is projected to grow by 6.3% in 2023 and further increase to 6.5% in 2024. This economic backdrop underscores the significance of efficient corporate fleet management in contributing to and benefiting from Vietnam's economic activities.

Environmental Considerations

Environmental sustainability is increasingly at the forefront of Vietnam's national agenda. Despite facing challenges such as air pollution and urban congestion, the country is committed to adopting greener practices. The need for corporate fleets to integrate fuel-efficient vehicles, optimize routes, and comply with emissions standards is critical in aligning with Vietnam's environmental goals and improving its Environmental Performance Index (EPI) standing.

Introduction to Sustainable Fleet Management and Electrification Efforts

Vietnam is taking significant strides toward sustainable fleet management and vehicle electrification, reflecting a growing consciousness about environmental sustainability within its borders. This evolution is particularly poignant given the country's current energy mix and the challenges associated with transitioning to Battery Electric Vehicles (BEVs). The Vietnamese government, along with private sector stakeholders, recognizes the urgent need to reduce CO2 emissions and mitigate the environmental impact of its transportation sector. By fostering policies and initiatives aimed at encouraging the adoption of electric vehicles (EVs) and improving the electric charging infrastructure, Vietnam is positioning itself as a proactive player in the global move towards cleaner, more sustainable transportation solutions.

Current Vehicle Landscape: Preferences and Powertrain Segments

The vehicular landscape in Vietnam is diverse, with a significant presence of Internal Combustion Engine (ICE) vehicles across various segments, including compact cars, MPVs, and SUVs. Popular models such as the Honda City, Mazda CX-5, and Toyota Camry dominate the roads, indicating a strong preference for ICE vehicles. However, the market is witnessing a gradual shift with the introduction of Hybrid Electric Vehicles (HEVs) and BEVs. Models like the Suzuki Ertiga HEV and VinFast VF e34 BEV are making inroads, reflecting a slow but steady transition towards electrification. The current powertrain distribution showcases a heavy reliance on conventional gasoline vehicles but also indicates an emerging interest in more sustainable alternatives, driven by changing consumer preferences and environmental policies.

Electric Vehicle Market Overview and Trends

Vietnam's electric vehicle (EV) sector is on the brink of significant growth, driven by increasing awareness, governmental incentives, and the entrance of domestic and foreign EV manufacturers. The market has seen a noticeable uptick in BEV and HEV adoption, though starting from a low base. VinFast, Vietnam's leading automaker, has been pivotal in promoting EVs, introducing models like the VF e34 and VF 8, and aiming to capture a considerable share of the local market. This push is complemented by the arrival of affordable EV options from Chinese manufacturers, diversifying the market and enhancing consumer choice. While the overall EV penetration remains modest, the sector's trajectory indicates a robust potential for expansion, supported by optimistic sales projections and a growing societal inclination towards sustainable transportation.

Energy Context: Electricity Emission Factors and Implications for Electrification

Vietnam's electricity grid, characterized by a high CO2e emission factor of 0.56 kg CO2e/kWh, poses challenges and opportunities for vehicle electrification. Predominantly reliant on fossil fuels for power generation, the country's energy context affects the net environmental benefits of transitioning to BEVs. While switching from ICE to BEVs can reduce CO2e emissions significantly, the extent of this reduction is contingent upon the integration of renewable energy sources into the national grid. Addressing the energy mix's carbon intensity is crucial for maximizing the environmental advantages of electrification and ensuring that the shift towards electric vehicles contributes effectively to Vietnam's sustainability goals.

Challenges and Opportunities in EV Adoption

Vietnam faces several obstacles in its journey towards widespread EV adoption, including high vehicle costs, limited charging infrastructure, and consumer apprehension regarding new technologies. However, these challenges are balanced by substantial opportunities, such as governmental incentives, increasing environmental awareness, and the strategic positioning of local manufacturers like VinFast. Developing a comprehensive network of charging stations and leveraging fiscal policies to lower the entry barriers for EV purchasers are pivotal steps in fostering a conducive environment for EVs. Additionally, the gradual but positive shift in consumer attitudes towards electric mobility, coupled with advancements in EV technology, offers Vietnam a promising path towards reducing its transportation sector's carbon footprint.

Additional Insights: Shaping the Future of Transportation

Vietnam's evolving transportation landscape presents a unique opportunity to redefine mobility through the lens of sustainability and innovation. As the country embarks on this transformative journey, the adoption of electric and hybrid vehicles stands out as a key strategy in mitigating environmental impact while catering to the growing demand for efficient and eco-friendly transportation solutions. The gradual increase in EV and HEV sales, supported by policy initiatives and infrastructure development, signals a shift towards a more sustainable future. This transition, though fraught with challenges, underscores Vietnam's commitment to embracing electrification and shaping a transportation ecosystem that aligns with global environmental goals and enhances the quality of life for its citizens.

The "Base Fleet" percentage is set according to the sales ratio of each powertrain in Viet Nam for the year 2023. (For countries where sales ratios cannot be obtained, it is assumed all are ICE vehicles.) The "Recommended Fleet" is designed to be realistic (based on a rank determined by the Electricity Emission Factor Category and EV Readiness Category, deciding a practical range) and efficient in reducing CO2e emissions. It is not expected that the entire fleet will switch to this mix at once but rather after one or two renewal cycles over about 4 to 8 years, considering the usual fleet renewal period is around 4 years. This is viewed as a recommendation for the fleet composition in 4 to 8 years.

The calculation of CO2e emissions is based on a fleet of 100 vehicles traveling an average of 30,000 km per year. Therefore, if your company's fleet size in Viet Nam is 1,000 vehicles, multiplying the results by 10 will give you an approximate value. For fuel, it is assumed all vehicles use petrol (2345.02 CO2e g/L), and for electricity, the average emission factor of Viet Nam is used. For PHEVs, it is calculated assuming 50% electricity usage and 50% fuel usage.

Analysis of Fleet Transition from Current State to Sustainable Future

This refers to the average CO2e emissions per kilometer calculated based on the actual energy (Fuel and Electricity) used. It also takes into account the size of the vehicles used in Viet Nam's fleet.

In Vietnam, a significant transformation in corporate fleet composition is underway, aiming at a sustainable and electrified future. The current fleet, heavily dominated by Internal Combustion Engine (ICE) vehicles, is set for a dramatic shift towards greener alternatives. From a substantial base of 93 ICE vehicles, the recommended transition strategy suggests a reduction to just 11, marking a pivotal step towards environmental sustainability. This strategy is particularly relevant in the context of Vietnam's high CO2e emission factor for electricity, placing it among the high emission countries due to its reliance on fossil fuels for power generation.

Simultaneously, the introduction and significant increase in Hybrid Electric Vehicles (HEVs) from 4 to 69 units underscore the pragmatic approach to leveraging current technology within the constraints of Vietnam's infrastructure. This shift not only reflects an understanding of the immediate feasibility of HEVs but also aligns with the EV readiness rank, indicating a moderately favorable environment for electric vehicles.

Battery Electric Vehicles (BEVs) also see an encouraging uptick from 2 to 14 units. Despite the limited CO2e emission reduction they currently offer, due to the electricity grid's composition, their increased presence signals a commitment to electrification. This transition, while mindful of current infrastructural and environmental limitations, lays the groundwork for future advancements in fleet electrification and CO2e emission reduction. It represents a balanced approach, considering the practicalities of today's technology and infrastructure, while striving for a greener, more sustainable fleet composition in Vietnam.

The transition of Vietnam's corporate fleet towards more sustainable powertrains presents a promising avenue for CO2 emission reductions. Currently, the fleet's CO2e emissions are heavily influenced by ICE vehicles, contributing a significant portion to the environmental footprint. The proposed transition drastically reduces the reliance on ICE vehicles, leading to a notable decrease in fuel-based CO2e emissions from 393 tons to a mere 46 tons. This shift is instrumental in aligning Vietnam's corporate fleet management practices with global sustainability goals, especially considering the country's classification among high emission countries for electricity production.

The introduction and substantial increase in HEVs, from 4 to 69 units, play a crucial role in this transition. HEVs, operating on both gasoline and electric power, offer a reduction in CO2 emissions without being entirely dependent on the national grid's CO2e emission factor. This strategic inclusion reflects a nuanced understanding of Vietnam's current energy landscape and the limitations of its electricity infrastructure in supporting a full transition to BEVs.

Furthermore, the transition plan incorporates BEVs, increasing their number from 2 to 14 units. While the current grid factor limits the CO2e reduction potential of BEVs, their increased adoption is a step towards normalizing electric vehicles within the fleet. This move is expected to contribute to gradual improvements in emissions as the electricity grid becomes cleaner. The total CO2e emissions, under the recommended fleet mix, show a significant reduction to 319 tons from the base case of 411 tons, demonstrating the impact of strategic fleet transition on environmental sustainability. This approach not only addresses immediate emission reduction targets but also sets a foundation for further advancements in electrification and CO2e emission savings.

Evaluating different fleet scenarios in Vietnam highlights the varying impacts of electrification strategies on CO2e emissions. The base fleet mix, predominantly consisting of ICE vehicles, sets a high baseline for CO2e emissions at 411 tons. Transitioning towards a more sustainable and electrified fleet composition significantly alters this landscape. The recommended transition, which envisages a diverse mix of ICE, HEV, PHEV, and BEV vehicles, reduces total CO2e emissions to 319 tons. This reduction is a testament to the strategic planning required to navigate Vietnam's current energy infrastructure challenges, marked by its high emission electricity production.

Exploring scenario-specific impacts, an all-ICE fleet would unsurprisingly result in the highest emissions at 418 tons, reaffirming the need for diversification away from solely fossil fuel-powered vehicles. In contrast, an all-HEV fleet emerges as a significantly more sustainable option, with emissions dropping to 314 tons, showcasing the potential of hybrid technology within Vietnam's current environmental and infrastructural constraints.

Further scenarios like an all-PHEV fleet suggest an intermediate position with emissions at 340 tons, indicating the balance between fuel and electricity-based emissions. The most transformative impact is observed in scenarios transitioning to an all-BEV fleet, with emissions contingent on the proportion of renewable electricity. With the current country average emission factor, emissions stand at 263 tons, but a gradual increase in renewable electricity usage dramatically lowers emissions to 66 tons with 75% renewable electricity. These findings underscore the pivotal role of energy infrastructure and renewable energy integration in realizing the full environmental benefits of fleet electrification in Vietnam, highlighting a pathway towards substantial CO2e emission reductions.

The stark differences across these scenarios emphasize the critical nature of Vietnam's energy transition and infrastructure development in achieving lower fleet emissions. Transitioning to BEVs, supported by a greener electricity grid, presents the most substantial opportunity for emission reductions. However, given Vietnam's current high electricity emission factor and the gradual development of renewable energy sources, HEVs and PHEVs offer a pragmatic interim solution. They bridge the gap between the current state and a future where electric vehicles can fully capitalize on low-carbon electricity.