As governments tighten emissions regulations to address urban air quality concerns, low-emission zones are increasingly being introduced in the transport sector.

In Vietnam, the recent launch of Hanoi's pilot Low Emission Zone (LEZ) scheme in the city's inner districts is part of a long-term roadmap aimed at reducing air pollution and gradually transitioning urban transport.

Under the approved roadmap, the pilot phase will run from July 1st to December 31st, 2026, covering only Zones 1 and 2 in Hoan Kiem Ward. In 2027, the programme will expand to Zone 3 in Hoan Kiem and Cua Nam wards. Full implementation across Ring Road 1 is scheduled for 2028-2029, before entering a long-term phase of evaluation, refinement and maintenance from 2030 onwards.

With the introduction of LEZs from July 1st, 2026, vehicle electrification has become a factor in market access rather than solely a matter of brand positioning or corporate social responsibility. As a result, Vietnam's automotive market is changing, with investment and market share increasingly shifting towards manufacturers that are prepared for the transition.

Previously, electric vehicle adoption in Vietnam was largely driven by financial incentives such as registration fee exemptions and reduced special consumption tax. While these measures encouraged early adopters and higher-income buyers to adopt the technology, their overall impact remained limited.

LEZ policies directly affect consumers' freedom of movement and the operational viability of transport businesses. As emissions-based traffic restrictions are introduced in urban areas of cities such as Hanoi and Ho Chi Minh City, petrol-powered motorcycles and conventional cars will no longer have unrestricted access to administrative and commercial centres.

This shift is prompting transport operators, logistics companies and ride-hailing fleets to reassess their total cost of ownership (TCO). Fleet electrification is evolving from a cost-management strategy into an operational requirement for businesses seeking to maintain urban transport services. The introduction of LEZs is also accelerating changes within the market, increasing electrification across multiple vehicle segments while widening the distinction between electric vehicles and conventional mid-range petrol-powered vehicles.

At the more affordable end of the market, compact urban EVs are attracting increased consumer interest and investment. Priced similarly to premium scooters while offering weather protection, lower charging costs and compact dimensions, these vehicles are increasingly being considered for urban mobility. At the higher end of the market, luxury brands are introducing electric models. For affluent residents living in city centres, EVs are becoming an option for maintaining access to LEZs.

In response, imported premium brands have accelerated the introduction of battery electric vehicles built on new vehicle platforms in an effort to retain existing customers. However, rising EV demand under LEZ policies also highlights a challenge facing Vietnam: urban charging infrastructure. While a domestic EV manufacturer has established a nationwide proprietary charging network, overseas brands from Europe and China face greater challenges.

Land suitable for charging stations within city centres and future LEZs is limited and expensive, making it financially challenging for brands with relatively modest sales volumes to develop proprietary charging infrastructure.

As a result, many foreign manufacturers are moving away from standalone infrastructure strategies in favour of partnerships. Collaboration with independent charging network operators and commercial property developers to install high-power charging facilities at office buildings and shopping centres is becoming more common among brands seeking to maintain their presence in urban markets.

LEZ policies are also reshaping dealership operations. Vietnam's automotive retail network is undergoing a geographical shift. Dealerships located within or near future LEZs are reallocating investment, reducing showroom space dedicated to internal combustion engine vehicles while expanding EV display areas and upgrading service facilities to meet battery safety requirements.

At the same time, inventories of petrol and diesel vehicles are increasingly being redirected to surrounding provinces and regions where LEZ policies have not yet been introduced. This trend is contributing to the emergence of two distinct automotive markets in Vietnam: an urban market with increasing EV adoption and a provincial market where internal combustion engine vehicles continue to dominate due to established refuelling infrastructure.

Another consequence of LEZ implementation is its impact on the used vehicle market, which plays a role in maintaining liquidity across the automotive industry. Stricter emissions regulations in city centres are expected to reduce the resale value of older petrol-powered vehicles, accelerating depreciation.

Conversely, the transition places greater pressure on EV manufacturers to provide transparent information regarding battery health, degradation and drivetrain durability throughout a vehicle's lifecycle. Low-emission zones represent an environmental initiative aimed at improving urban air quality and are also affecting Vietnam's mobility sector, requiring both established manufacturers and emerging technology companies to adapt their products, pricing strategies and infrastructure plans.

In the LEZ era, competitive advantage may increasingly depend on a company's ability to develop supply chains, address urban energy infrastructure requirements and provide electric mobility solutions that meet consumer requirements.