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Move on Tesla, how about a VinFast?
This is the proposal proposed by the automotive branch of Vietnam’s largest conglomerate, Vingroup (VIC.HM). It is betting big on the US market with its VinFast line of cars and hopes that electric SUVs and a rental battery model will be enough to keep consumers away from local market leaders like Tesla (TSLA.O) and General Motors Co (GM. NOT) .
A recent arrival on the automotive scene and No. 5 car brand in Vietnam, VinFast is not short of ambition, with its sights set on an American listing and a valuation of up to $ 60 billion, according to two sources. close to his projects.
It will launch in North America and Europe in 2022, CEO Nguyen Thi Van Anh told Reuters, joining a group of overcrowded players looking to compete with Elon Musk’s Tesla, including a string of loss-making debutants fueled by a fundraising craze on Wall Street.
“We are going to North America – United States, Canada – and Europe at the same time. In Europe, we are going to Germany, France and the Netherlands,” Van Anh said in an interview with the vast industrial complex of the company near the north of the country. Haiphong port.
Behind VinFast is Vingroup, Vietnam’s answer to a South Korean chaebol or catch-all conglomerate. Founded as an instant noodle company in post-Soviet Ukraine, the company’s trajectory mirrored that of Vietnam, one of Asia’s fastest growing economies, with interests spanning real estate. , resorts, schools, hospitals and smartphones.
Even with such tremendous local support, VinFast has its work cut out for it 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.
Founded in 2017 with a team led by former General Motors Co executives, the company aims to compete on vehicle size and price – by showcasing an electric SUV that Van Anh has described as “more luxurious” than those currently on offer. .
VinFast cars will also come with a battery rental program which means that the cost of the battery, one of the most expensive components in an electric car, will not be 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 move next month from Hanoi to Los Angeles to lead the US operations of VinFast. .
According to a presentation prepared by the company for potential investors, VinFast cars will be cheaper than other electric vehicle (EV) models.
A Tesla SUV sells for around $ 50,000, but Van Anh, who declined to discuss potential competitors, would not be drawn to the price of a VinFast SUV. 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 ADVANTAGE OVER COMPETITION?
There is a precedent for Asian automakers trying to break into the US market. Toyota in the 1970s and Hyundai (005380.KS) in the 1980s overcame initial skepticism with products that ultimately stole market share from American manufacturers.
VinFast, which achieved annual sales of around 30,000 units last year in Vietnam and has yet to make a profit, faces an uphill battle.
“Their biggest challenge is convincing consumers that they have a solid product and a compelling value proposition,” said Bill Russo, director of the Shanghai-based consultancy Automobility Ltd and former CEO of Chrysler.
“The product itself seems to have the right looks and the right features, but that will only put you in the game. Winning requires technology or a business model advantage over the competition.”
The company is betting its battery rental program – where customers would pay a monthly amount roughly equivalent to what the average consumer could spend on gasoline – will win over U.S. customers.
When the battery, which uses cells from South Korea’s Samsung SDI (006400.KS), reaches 70% of its full life, VinFast will replace it, Van Anh said.
A similar program has already been rolled out 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).
No electric vehicle maker can compete with Tesla in the near future, according to Michael Dunne, chief executive of automotive consultancy ZoZo Go, stressing the overall strengths of the American company.
“But the good news is that companies like VinFast don’t have to beat Tesla to win. All they really need is to convert some of the 65 million consumers who bought gasoline cars in 2020 to switch to electricity, ”Dunne said.
VinFast, whose manufacturing facility in Vietnam has the capacity to produce 250,000 cars per year, plans to do most of its sales online in the United States, eliminating the need for an expensive dealer network. To date, it has received 15,000 advance orders for its VF e34 electric car in Vietnam.
The company hired Jeremy Snyder, a 10-year Tesla veteran, as the director of growth in the United States.
Snyder told Reuters he was VinFast’s first field employee in the United States but, between full-time employees and consultants, the company now has around 100 people working there.
“It’s very exciting to bring Vietnam and the United States together through VinFast,” he said.
TAPPING THE SPAC?
Vingroup founder Pham Nhat Vuong, Vietnam’s richest man, pledged to invest $ 2 billion of his own money in the auto division and Vingroup poured hundreds of millions into VinFast by issuing international bonds and by selling stakes in other units.
But expansion over the years has driven up Vingroup’s debt, and losses in some of its businesses have reduced its cash flow.
To boost its growth, VinFast will need more liquidity. The company plans to operate a fundraising frenzy in the United States, where investors, including some of the world’s largest fund managers, have invested billions in auto startups through blank check companies known as special purpose acquisition companies or SPAC.
Three sources with direct knowledge of the plans said VinFast was leaning towards a PSPC, although Van Anh declined to comment on when and how the company would generate funding in the United States.
Officials from the US Securities and Exchange Commission will soon be traveling to Vietnam to meet with executives at Vingroup about its listing efforts, two separate sources said. If VinFast is listed in the United States, it will be the first Vietnamese company to do so.
“When that happens, how does it go, whether it’s PSPC or some other method, we’ll make the right decision at the same time,” Van Anh said.
There are hundreds of PSPCs looking for companies to go public and investors are desperate 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 stock exchange listing and sold just under 44,000 cars in the year. last, close to what VinFast is targeting in the United States.
A stream of electric vehicle-related startups recorded valuations of billions of dollars last year, although the products are not ready to be sold, but their stocks have recently taken a hit.
VinFast likes to stand out from other EV startups.
“If you look at some of the PSPC deals that have happened before, they don’t really have what we have now,” Van Anh said.
“Even though we don’t have a product in the world market, we have the products here.”
($ 1 = 6.4771 Chinese renminbi yuan)
Our Standards: Thomson Reuters Trust Principles.
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