Vietnam’s VinFast looks to small EVs, priced under $10,000, to change its fortunes

Vietnamese car VinFast, for a short time the third most valuable car company in the world, has a big problem: It just can’t sell enough cars.

Idle factories are bleeding money and the financial health of the company is at stake. Having found the US market a tough nut to crack, Vinfast hopes its smallest and cheapest car – a 10-foot pure battery electric mini-SUV priced at $9,200 and called the VF3 – will become Vietnam’s “national car” and win over consumers in the Asian market.

Designed specifically for the Vietnamese and other Asian markets, the VF3 is priced for “mass appeal,” according to VinFast. Expect greater sales than from the previous model intended mainly for export to western countries, Le Thi Thuy, chairman of Vingroup, said on an earnings call in April.

VinFast is dreaming of breaking into the big league of global automakers when it opened sales in the US last year and listed its shares on Nasdaq, where its market value briefly surpassed General Motors Corp and Ford Motor Co in late August.

Investor enthusiasm has since cooled, and the stock is trading down $4 from a peak of $82.35. VinFast is facing delays in the construction of a $4 billion plant in North Carolina, where the company said in an email that it is reviewing and evaluating “all aspects of the construction process.” It is facing legal trouble over a crash that killed four people in California. It also deals with allegations of patent infringement.

The future of VinFast is important for Vietnam, because its ambitions are in line with the goals of the Communist Party itself, and because of the huge role of Vingroup companies in the Vietnamese economy. The conglomerate started as an instant noodle company in Ukraine in the 1990s and now runs all kinds of businesses.

VinFast reported a net loss of $2.39 billion last year, despite a 90% increase. To repair its battered finances, Vingroup recently sold its profitable commercial property arm, Vincom Retail. The founder of Vingroup, Pham Nhat Vuong, has made $1 billion from his personal wealth, on top of $11.4 billion from the parent company’s funding injected into VinFast in 2017-2023, according to a filing with the US Securities and Exchange Commission.

“We will not let VinFast go,” he told Vingroup shareholders at their annual general meeting in April, according to state media.

The VF3 will initially be sold in emerging markets in Asia, where car buyers graduating from motorcycles to four-wheelers may not be as keen on Americans, said Tu Le, founder of consultancy Sino Auto Insights.

Only 3.1 meters long, and 1.6 meters wide and high (10 feet long and 5.2 feet wide and high), it can squeeze into the narrow streets of Asian cities, but still five seats.

VinFast aims to sell 20,000 of these cars in Vietnam this year and deliveries will start in August. It is being sold on Southeast Asian e-commerce website Shopee, with an initial deposit of around $2,000. The company said more than 27,000 people applied to buy the car in the first three days after orders opened on May 13.

Many, like 32-year-old Dieu Linh, are the first to buy a car. Being a businessman, he and his wife wanted to switch from motorcycles to cars, which are safer and more comfortable when it’s too hot or rainy.

“The price of VF3 is tempting. But I will wait and see how it performs on the road before I make a deposit,” he said.

VinFast plans to start selling the VF3 in the Philippines this year and in Indonesia, Thailand, the US, and Europe next year.

It opened its first showroom in Jakarta, the capital of Indonesia, in April and said it has sold around 600 SUVs to Indonesian companies. It has started building factories in India.

Even in the Asian market, VinFast faces a lot of competition, especially from China’s EV maker BYD, which has achieved a considerable scale for cost-efficient manufacturing. Chinese EV manufacturers like BYD and Haima are expanding rapidly in Southeast Asia. But in Vietnam, VinFast has almost a monopoly on charging infrastructure – charging stations in the country, not only in big cities but also in more remote hilly provinces – consumer mistrust of Chinese products and nationalist sentiment may give it an early edge , said Le Hong Hiep. , a visiting fellow at Singapore ISEAS-Yusof Ishak Institute.

BYD plans to launch three models – Atto 3, Dolphin and Seal – in Vietnam next month.

VinFast needs to increase sales to reduce per-unit costs for its sprawling factory in northern Vietnam’s Haiphong province, which has the capacity to make about 250,000 EVs a year but makes a fraction of that.

“Idle factories just burn money,” said Tu Le, a car consultant.

India, the world’s third-largest auto market by sales, offers the promise of scale, but only if VinFast builds its own factory there to benefit from policies that protect local automakers. High import taxes mean that even at $9,200, the VF3 will be too expensive for Indians, says Ishan Raghav, managing editor of Indian car magazine autoX.

The VF3 is likely to appeal to Indian families looking for a compact car with a decent range for commuting in India’s congested cities. But newcomers need to set up a broad sales and EV charging network and that will take several years, he said. “All of this – manufacturing, sales and service and the charging network – is capital intensive and takes time,” he said.

Vingroup has launched a company called V-Green to build its own charging infrastructure in Vietnam and other key markets. In Thailand, the plan is to build its own charging infrastructure, Vu Dang Yen Hang, chief executive of VinFast Thailand, told The Associated Press in an interview in March.

VinFast is racing against time.

Despite prioritizing sales in the US, it sold less than 1,000 cars in North America last year and only around 35,000 cars globally, below the target of at least 40,000 cars. About two-thirds of VinFast’s revenue in 2023 will come from sales to Vingroup-owned taxi services, according to a filing with the US Securities and Exchange Commission.

VinFast’s main challenge is improving its financial performance, Hiep said.

“If it can’t last long, it could go bankrupt,” he said.