Vietnam Rental Car Market Outlook to 2030

Vietnam Rental Car Market Overview

• The Vietnam rental car market is valued at USD 0.88 billion, driven by the growing demand from both leisure travelers and business tourists. Increased tourism, particularly in key tourist hubs like Ho Chi Minh City and Hanoi, plays a crucial role in driving market demand. The market has also benefited from Vietnams rapidly expanding middle class and rising disposable income, which encourages higher spending on transportation services. Furthermore, the adoption of ride-hailing services like Grab, offering car rentals, has further supported the market's growth.
• Ho Chi Minh City and Hanoi are the dominant cities in Vietnams rental car market due to their status as major business and tourism hubs. Both cities are home to a significant number of expatriates, international businesses, and corporate offices, which increases the demand for business travel. Additionally, these cities witness high tourist footfall, contributing to a robust demand for leisure car rentals. The presence of better infrastructure and accessibility to modern roads also enhances the rental experience in these urban centers.
• Vietnamese authorities impose strict licensing requirements for car rental companies, which are overseen by the Ministry of Transport. To legally operate, companies must obtain a business license and meet the regulations related to vehicle safety, insurance, and emissions. As of 2023, new regulations require periodic inspections of rental vehicles to ensure they meet roadworthiness standards, adding an additional compliance burden for rental companies.

Market Segmentation

• By Service Type: The Vietnam rental car market is segmented by service type into Self-Drive Rentals and Chauffeur-Driven Rentals. Self-drive rentals dominate the market due to the growing trend of personalized travel experiences. Vietnamese consumers, especially younger demographics, prefer the flexibility of driving their vehicles, which provides convenience for road trips and local exploration. Furthermore, with urban dwellers favoring weekend getaways, self-drive services remain a popular choice. The affordability of renting vehicles without a driver also makes this segment attractive to budget-conscious customers.

• By Vehicle Type: The Vietnam rental car market is further segmented by vehicle type into Economy Cars, Luxury Cars, SUVs and MPVs, and Electric Vehicles. Economy cars hold the largest market share due to their affordability and fuel efficiency, making them ideal for budget-conscious travelers. Brands such as Toyota and Kia dominate the economy car rental market, supported by their widespread availability and cost-effectiveness. This segment is preferred by both domestic travelers and international tourists looking for value-for-money travel solutions.

Vietnam Rental Car Market Competitive Landscape

The Vietnam rental car market is dominated by both international and local players, with global brands like Avis and Budget competing alongside local providers such as Vinasun. These companies have established a strong foothold in key cities, offering a range of vehicle options and pricing tiers. Global players bring in technological innovations such as online booking platforms, while local companies focus on cost competitiveness and familiarity with local regulations.

Vietnam Rental Car Industry Analysis

Growth Drivers

• Surge in Domestic and International Tourism: Vietnam has experienced significant growth in domestic and international tourism, driven by a recovery in travel demand post-COVID. In 2022, Vietnam welcomed 3.66 million international tourists, a sharp increase from 2021 as per the Vietnam National Administration of Tourism (VNAT). This trend continues in 2024, with the number of international tourists estimated to exceed 10 million. The influx of both domestic and international tourists has increased demand for rental cars, particularly in major tourist destinations like Hanoi, Ho Chi Minh City, and Da Nang.
• Growing Corporate Demand for Car Rentals: The rise of business and corporate travel in Vietnam is a key growth driver for the rental car market. Vietnam's gross domestic product (GDP) reached $411 billion in 2022, with a significant contribution from sectors such as manufacturing, IT, and finance, which attract corporate travelers. The business travel sector contributes to the increased use of rental cars by corporate clients. This trend is expected to strengthen as corporate travel resumes in full capacity post-pandemic, particularly in cities like Ho Chi Minh and Hanoi.
• Urban Population Expansion and Need for Convenient Mobility Solutions: Vietnams urban population reached 37.5 million in 2023, according to the World Bank, accounting for nearly 38% of the total population. Urbanization is driving the need for flexible and convenient mobility solutions, including car rentals, especially for those who do not own private vehicles. Urban centers like Hanoi and Ho Chi Minh are experiencing significant demand for short-term rentals and self-driving cars as people seek alternatives to traditional public transportation.

Market Restraints

• Stringent Government Regulations for Car Rentals: The Vietnamese government imposes stringent regulations on the car rental market, particularly concerning driver safety and vehicle registration. Car rental companies must meet specific licensing and insurance requirements, which can be cumbersome for new market entrants. In 2023, the Ministry of Transport updated regulations that mandate compliance with vehicle safety and emissions standards, further adding to operational complexities for rental businesses.
• High Costs of Maintaining and Expanding Car Rental Fleets: Car rental companies in Vietnam face high operational costs related to fleet maintenance and expansion. The cost of maintaining a vehicle fleet in line with Vietnams road safety and environmental regulations adds to the financial burden. In 2023, vehicle import tariffs were as high as 70%, according to the Vietnam Ministry of Finance, which makes expanding fleets more costly. This results in rental companies facing difficulties in upgrading or enlarging their car pools to meet growing demand.

Vietnam Rental Car Market Future Outlook

Over the next five years, the Vietnam rental car market is expected to experience steady growth, driven by increasing tourism, rising disposable incomes, and the expanding demand for business travel. The countrys growing middle class is likely to further stimulate demand for affordable transportation solutions, while the rise in business tourism will enhance the need for chauffeur-driven rentals. Additionally, as the adoption of electric vehicles (EVs) gains momentum, rental agencies are expected to incorporate more EV options into their fleets, responding to global trends in sustainability and green transportation.

Market Opportunities

• Adoption of Digital Platforms and Mobile Apps for Car Rentals: With digital transformation accelerating across Vietnam, the adoption of online platforms and mobile apps for car rentals is increasing. In 2023, Vietnam recorded over 93 million smartphone users, according to data from Statista. Car rental companies are leveraging digital solutions, offering online booking, real-time vehicle availability, and mobile payment options. These technological advancements help companies streamline operations and cater to the digitally savvy population.
• Increasing International Tourists Driving Rental Demand: Vietnam continues to attract international tourists due to its cultural heritage, affordable travel options, and easing of entry restrictions. In 2023, nearly 7.5 million international tourists visited Vietnam, according to VNAT. With the government targeting tourism as a key growth sector, this influx of international travelers is projected to sustain high demand for rental cars, especially in popular tourist regions. This presents a lucrative opportunity for the rental car market to capitalize on.