Vietnam is advancing from assembly operations towards mastering core automotive technologies following the inauguration of the Kim Long Engine Manufacturing and Assembly Plant, officially named the YUCHAI Engine Production & Manufacturing Plant, at the Chan May-Lang Co Economic Zone in Hue on 5th December 2025.

Nguyen Si Dung, former Vice Chairman of the National Assembly Office, highlighted the facility's potential impact on the country's automobile industry.

Kim Long Motor Hue, a subsidiary of Vietnam's FUTA Group, has partnered with China's Yuchai Group to establish this advanced engine manufacturing plant in Chan May-Lang Co, Thua Thien-Hue Province.

Under a 15-year strategic cooperation agreement, Yuchai provides technology licensing, technical support, and guidance for plant construction, enabling Kim Long to produce and distribute Yuchai engines domestically and in select ASEAN markets.

The US$ 260 million facility features highly automated production lines and smart manufacturing systems, with an initial annual capacity exceeding 40,000 engines for automobiles, marine vessels, agricultural machinery, and generators. The plant's official inauguration in December 2025 coincided with the production of its first engines, including the Yuchai K11 and Y24 models, marking a significant step in Vietnam's localisation of core engine technologies.

Pivotal shift from assembly to mastering core stages

For many years, Vietnam's automobile industry has depended heavily on imported components, particularly engines, which are the most complex and value-defining elements of a vehicle.

With the Kim Long Engine Manufacturing and Assembly Plant now operational, featuring over 90 per cent automation and full data traceability, Vietnam is moving closer to producing core components in the automobile value chain. The localisation rate is expected to increase as the engine block, crankshaft, cylinder head, and other core components are produced domestically.

Chan May-Lang Co: from favourable location to new growth pole

The plant is situated within the Chan May-Lang Co Economic Zone, a region with a deepwater port along the North-South corridor. It forms the basis for an automobile and mechanical cluster that includes casting, forging, machining, research and development, quality inspection, industrial logistics, and technical training activities.

The venture is expected to contribute to the formation of an industrial growth area in the central region and support movement towards higher-value manufacturing stages.

Opportunity for Vietnam to elevate position in ASEAN

Within ASEAN, the automobile industry is segmented: Thailand is referred to as the "Detroit of Asia"; Indonesia has a large market and mass-assembly capability; and Malaysia focuses on developing its national brand. Although Vietnam remains several decades behind, there is an opportunity for it to advance within the automobile value chain.

Global supply-chain adjustments have encouraged multinational corporations to diversify production in automotive-related sectors. Vietnam holds three advantages relevant to the automobile industry: a central position in ASEAN, increasing industrial capacity relating to automotive production, and preferential tariff access through multiple free trade agreements.

Vietnam has produced automobile engines domestically for the first time. The Kim Long Engine Manufacturing and Assembly Plant can contribute in three areas:

- enabling deeper participation in regional automotive supply chains in Thailand and Indonesia;
- attracting assembly companies and core automotive component manufacturers, including mould, casting, forging, sensor, and control-chip producers;
- supporting the development of Vietnam's automotive design and manufacturing capabilities.

Identifying challenges to avoid missed opportunities

To maximise the impact of the new engine plant, several challenges must be addressed.

A key challenge is achieving substantive localisation through technology transfer, strengthening domestic component manufacturers, and developing proficiency in core engine technologies.

Another challenge relates to the shift towards green technologies. The global automobile industry is transitioning towards electric vehicles, hybrids, and clean powertrains. Vietnam must continue developing internal-combustion engines while preparing for newer propulsion systems.

Supporting industries are also essential. A network of mechanical, casting, forging, materials, and automotive component manufacturers is required to establish a sustainable domestic supply chain.

The engine industry requires a highly skilled workforce, necessitating training models that align with production requirements.

From industrial milestone to national launchpad

To ensure the engine plant contributes effectively to the automobile sector, long-term and coordinated policy support is required.

Substantive localisation must be prioritised through compulsory technology-transfer roadmaps and enhanced R&D capabilities. The localisation rate should be evaluated according to economic value and technological content.

A supporting-industry ecosystem around Chan May-Lang Co is necessary to enable domestic suppliers to participate in the supply chains of Kim Long and regional manufacturers.

Investment in technical human resources is also required, including dual training models, production-linked curricula, and advanced manufacturing training centres.

Long-term regional planning is necessary to ensure appropriate industrial and logistics infrastructure for engine production.

Vietnam must also prepare for the adoption of green automotive technologies by establishing national standards and regulations for new-energy vehicle components and powertrain systems.

The Kim Long Motor Hue Industrial Cluster has expanded technology-transfer efforts and increased research and testing of hybrid engines, electric motors, fuel cells, and other automotive technologies.

If Vietnam implements ecosystem development, workforce training, technological upgrading, and planned infrastructure effectively, the inauguration of the Kim Long Engine Manufacturing and Assembly Plant will represent a shift in its participation in the global automotive value chain.