State Policy and the Development of Vietnamese Automobile Industry

Abstract

This paper examines the role of state capacity in the development of Vietnam’s automobile industry from the perspective of developmental state theory. It argues that the Vietnamese state functions as the central actor in shaping the industry through strategic planning, industrial policies, and selective intervention toward multinational corporations (MNCs), domestic firms, and consumers. Using a qualitative political economy approach, the study analyzes four key dimensions of state capacity: developmental purpose, policy instruments, empowerment, and dependence. The findings show that Vietnam’s automobile development has evolved through three major stages. The first stage was characterized by an MNC-driven strategy in which foreign automobile corporations were expected to provide capital, technology, managerial expertise, and integration into global production networks. However, limited technology transfer and low localization rates prompted the state to shift toward a second stage focused on domestic firm-driven development. In this phase, the government increasingly supported national champions such as THACO, TC Motor and VinFast to strengthen industrial self-reliance and technological capability. A future third stage may involve a more consumer-oriented development model associated with rising middle-class demand and pressures for lower automobile prices. The study concludes that Vietnam’s automobile industry reflects a quasi-developmental state model in which strong state intervention coexists with market mechanisms and global integration. Despite significant progress, major challenges remain, including technological dependence, weak supporting industries, low localization rates, and policy inconsistency.