Japan warns Vietnam of job losses as Hanoi petrol-powered motorbikes ban hits Honda

[HANOI/TOKYO] The Japanese government and some of the nation’s top manufacturers have warned Vietnam that a planned ban on petrol-powered motorbikes in Hanoi could spark job losses and disrupt a US$4.6 billion market that is dominated by Honda, according to documents reviewed by Reuters and seven people familiar with the matter.

In July, Vietnamese Prime Minister Pham Minh Chinh issued a directive prohibiting petrol motorbikes from entering the centre of the capital from the middle of 2026, as the country seeks to reduce high levels of air pollution. Broader restrictions are due in 2028 and bans are expected to spread to other parts of the country.

In response, the Japanese embassy in Hanoi sent a letter to Vietnamese authorities saying a sudden ban could “affect employment in supporting industries” such as motorcycle dealers and parts suppliers, according to a statement from the embassy summarising its letter. The embassy declined to share the full contents of the letter, which is being reported for the first time.

The embassy also urged Vietnamese authorities to consider an “appropriate roadmap” for electrification that would include a preparation period and staged implementation of regulations.

The embassy declined to say when the letter was sent, although one Japanese government official said it was relayed in September.

Vietnam’s two-wheeler market is one of the world’s largest – worth an estimated US$4.6 billion this year, according to market research firm Mordor Intelligence – with the number of registered motorbikes last year approaching 80 per cent of the country’s population of 100 million, one of the highest ownership rates globally.

Manufacturers warn of potential bankruptcies

The main trade group for foreign motorcycle makers in Vietnam, which is led by Honda and includes Yamaha and Suzuki, sent its own letter to the government in July warning that the ban could result in “production interruptions and the risk of bankruptcy” for companies in the supply chain, according to a copy of the letter reviewed by Reuters.

The manufacturers said the ban could have “spillover effects” on hundreds of thousands of workers and cited potential disruptions for nearly 2,000 dealers and some 200 component suppliers.

They urged the implementation of a transitional period “with a minimum preparation time of two to three years” to allow time for them to adjust production lines while a network of charging stations and safety standards are expanded.

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Vietnamese officials have thus far declined to act on the requests from the Japanese government and manufacturers, according to three people familiar with the discussions. These people, like others who spoke to Reuters, declined to be identified because of the sensitivity of the issue.

Vietnam’s government did not respond to a request for comment.

The government has said the ban is necessary to tackle high air pollution levels in Hanoi. Authorities in Ho Chi Minh City, Vietnam’s largest metropolis, have also signalled plans to restrict petrol-powered vehicles.

Addressing concerns about the switch to electric power, Prime Minister Chinh told Japanese executives in August that reducing emissions is a global issue requiring joint efforts “to choose the most optimal solution with a suitable roadmap,” according to the government’s online portal.

In Vietnam, Honda is synonymous with motorbikes

Honda, which controls 80 per cent of the two-wheeler market in Vietnam with 2.6 million vehicles sold last year, has led the charge to have authorities revise the directive, according to three of the people, all of whom attended or were briefed about meetings with the Vietnamese government and other officials in recent months.

In private, one Honda representative raised the possibility that the company could consider scaling back its production in Vietnam in response, according to one of the people.

Honda said it was closely monitoring the situation, but had no plan to close factories.

The Japanese manufacturer has four factories in Vietnam, where it is so dominant that its brand name has become a shorthand for “motorbike” in Vietnamese.

Almost all of the motorbikes it sells in Vietnam and elsewhere are powered by petrol. But it does also offer the CUV e: and ICON e: battery-powered models in the country.

Honda’s sales in Vietnam tumbled by almost 22 per cent in August from July, the month the ban was unveiled, before recovering slightly in September. The company recorded double-digit sales declines from a year earlier in August and September.

As Honda’s automotive business has been squeezed by heightened competition due to a global shift to electric cars, it has become more reliant on its motorcycle business as a profit driver.

Vinfast sales are rising – fast

Meanwhile, sales of electric motorbikes and e-bikes made by Nasdaq-listed Vietnamese firm VinFast rose 55 per cent to nearly 70,000 in the second quarter of 2025 from the first quarter.

They are expected to surge following the ban, according to a consumer survey conducted in September by market research firm Asia Plus.

The proposed environmental measures have also had an impact on Vietnam’s petrol car sales, which fell 18 per cent in September from a year earlier for members of Vietnam Automobile Manufacturers’ Association (Vama), the country’s largest auto industry association, which includes several Japanese brands.

Last month, Vama said it did not expect a direct impact from the motorbike ban but acknowledged that “some customers are hesitant to buy new cars” following the government’s announcements.

Japanese carmaker Toyota is the market leader with more than a quarter of total car sales in September, according to data from Vama. REUTERS