A worker works at the VinFast factory in Hai Phong, Vietnam on April 22, 2021. The photo was taken on April 22, 2021. REUTERS / Thanh Hue
Moving over Tesla, how about a VinFast?
This is the proposal of the automotive branch of the largest Vietnamese conglomerate, the Vingroup (VIC.HM). It is entering the US market with its VinFast range and hoping that electric SUVs and a battery leasing model will be enough to draw consumers away from domestic market leaders like Tesla (TSLA.O) and General Motors Co (GM.N). .
VinFast has recently entered the automotive scene and is the No. 5 car brand in Vietnam. VinFast is targeting a US listing and valuation of up to $ 60 billion, according to two sources familiar with its plans.
It will roll out in North America and Europe in 2022, CEO Nguyen Thi Van Anh told Reuters, joining a crowded field of players looking to compete with Elon Musk’s Tesla.
“We’re going to North America – USA, Canada – and Europe at the same time. In Europe we’re going to Germany, France and the Netherlands,” Van Anh said in an interview in the company’s sprawling factory complex near the northern port of Haiphong.
Behind VinFast is Vingroup, Vietnam’s answer to a South Korean chaebol or a collective conglomerate. The company was founded as an instant noodle business in post-Soviet Ukraine and reflects the development of Vietnam, one of the fastest growing economies in Asia with interests in real estate, resorts, schools, hospitals and smartphones.
Despite this impressive on-site support, VinFast has ceased operations as industry giants such as General Motors, Toyota (7203.T) and Volkswagen (VOWG_p.DE) spend tens of billions of dollars developing electric and driverless vehicles.
The company was founded in 2017 with a team led by former executives from General Motors Co. The aim is to compete in terms of vehicle size and price with an electric SUV that Van Anh describes as “more luxurious” than those currently on offer.
VinFast vehicles will also come with battery leasing, which means that the cost of the battery, one of the most expensive components of an electric car, is not included in the final price.
“I’ll give you a better product. I’ll give you an SUV. I’ll give you a more spacious car,” said Van Anh, who will be moving from Hanoi to Los Angeles next month to lead VinFast’s US operations.
According to a presentation by the company to potential investors, VinFast vehicles will be cheaper compared to other electric vehicle models.
A Tesla SUV costs around $ 50,000, but Van Anh, refusing to discuss potential competitors, wouldn’t benefit from how much a VinFast SUV would sell. Two of the company’s three electric models are destined for the United States, where the company targets annual sales of 45,000 cars, she said.
An edge above the competition?
There are precedents for Asian automakers cracking the US market. Toyota in the 1970s and Hyundai (005380.KS) in the 1980s overcame initial skepticism with products that eventually stole market share from US manufacturers.
VinFast, which had annual sales of around 30,000 units in Vietnam last year and has not yet made a profit, is facing an uphill battle.
“Your biggest challenge is convincing consumers that they have a solid product and a compelling value proposition,” said Bill Russo, head of Shanghai-based consulting firm Automobility Ltd and a former Chrysler executive.
“The product itself seems to have the right looks and functions, but that just gets you into the game. It takes a technological or business model advantage over the competition to win.”
The company is confident that its battery leasing program, in which customers would pay a monthly amount roughly equivalent to what the average consumer could spend on gasoline, will attract US customers.
When the battery, which uses cells from the South Korean Samsung SDI (006400.KS), reaches 70% of its full life, VinFast will replace it, Van Anh said.
A similar program has already been launched in China by Tencent-backed electric vehicle maker Nio (NIO.N), whose ES6 SUV has a starting price of around 358,000 yuan ($ 55,272).
According to Michael Dunne, managing director of automotive consultancy ZoZo Go, no EV manufacturer can compete with Tesla in the near future, pointing to the US company’s overall strengths.
“But the good news is, companies like VinFast don’t have to beat Tesla to win. All they really have to do is switch some of the 65 million consumers who bought gasoline-powered cars in 2020 to switch to electrical “he said to Dunne.
VinFast, whose manufacturing facility in Vietnam can produce 250,000 cars a year, plans to do most of its US sales online without the need for an expensive dealer network. So far, 15,000 pre-orders for the VF e34 electric car have been placed in Vietnam.
The company has hired Jeremy Snyder, a 10-year Tesla veteran, as their U.S. chief growth officer.
Snyder told Reuters that he will be VinFast’s first on-site employee in the United States. Between full-time employees and consultants, around 100 employees currently work in the company.
“It is very exciting to bring Vietnam and the US closer through VinFast,” he said.
Knock on the room?
Vingroup founder Pham Nhat Vuong, Vietnam’s richest man, has pledged to invest $ 2 billion of his own money in the auto division, and Vingroup has poured hundreds of millions of dollars into VinFast by issuing international bonds and selling stakes in other entities.
However, expansion over the years has boosted Vingroup’s debt, and losses at some of its companies have depressed cash flow.
VinFast needs more cash to drive its growth. The company plans to tap into a U.S. funding frenzy that has seen investors, including some of the world’s largest money managers, invest billions in auto starts through blank check firms called special-purpose acquisition firms, or SPACs.
Three sources with direct knowledge of the plans said VinFast was prone to a SPAC, even though Van Anh refused to comment on when or how the company would raise funds in the US.
US Securities and Exchange Commission officials will visit Vietnam soon to meet with Vingroup executives about their listing efforts, two different sources said. If VinFast is listed in the US, it will be the first Vietnamese company to do so.
“If it happens the way it does, whether through SPAC or some other method, we will be making the right decision at the same time,” said Van Anh.
There are hundreds of SPACs out looking for companies to go public, and investors are dying to identify the next Tesla whose stratospheric market rally has made Musk one of the richest men in the world.
Nio, which posted a net loss of $ 860 million last year, has a market cap of around $ 67 billion, according to its New York listing, and sold just under 44,000 cars last year, close to what VinFast is aiming for in the US.
A number of electric vehicle-related startups posted billions of dollars in valuations last year despite having no ready-to-sell products, but their stocks have taken a hit recently.
VinFast likes to differentiate itself from other EV startups.
“If you look at some of the SPAC deals that have already been made, they don’t really have what we currently have,” said Van Anh.
“Even if we don’t have a product on the world market, we have the products here.”
($ 1 = 6.4771 Chinese yuan renminbi)
Our standards: The Thomson Reuters Trust Principles.