VinFast (VFS), an electric vehicle (EV) manufacturer, is likely unfamiliar to most Americans. Nonetheless, Vinfast has garnered considerable attention due to its surging valuation and volatile stock price changes in the US market.
VinFast shares have once again set in motion a rollercoaster ride, surging by 11% during early trading hours only to tumble by nearly 9% during midday trade. Just recently, the stock experienced a staggering drop of 44%, abruptly ending a six-day winning streak and causing a staggering loss of $83 billion in market capitalization in a single day. Yet, this narrative is only part of the saga. Following its listing on August 15 through a Special Purpose Acquisition Company (SPAC) merger with Black Spade Acquisition, VinFast shares have skyrocketed by almost 700%.
The inception of VinFast traces back to entrepreneur Pham Nhat Vuong’s establishment of Vingroup in 1993—a conglomerate that eventually expanded its footprint across the food, entertainment, and health-care sectors in Vietnam. Expanding its horizon further, Vingroup made a groundbreaking entry into the automotive domain, a pioneering feat for any Vietnamese enterprise.
Sam Fiorani, Vice President at manufacturing data provider AutoForecast Solutions, noted, “Vuong decided to enter the automotive industry through a VinFast subsidiary.” This initiative led to the acquisition of a former General Motors plant, and in collaboration with BMW, VinFast launched its maiden internal combustion vehicles.
Although VinFast’s sub-compact model Fadil, based on the GM platform, quickly secured top ranks in Vietnamese sales in 2021, the company soon shifted its focus towards EVs. Demonstrating remarkable audacity, VinFast introduced its electric offerings to the fiercely competitive US market shortly after their global debut, commencing sales in the first quarter of this year.
According to Asian automotive and supply chain expert Michael Dunne, “Vietnam and VinFast have accomplished in the space of a few years what its neighbors in SE Asia like Thailand and Indonesia could not achieve over decades of trying: Manufacturing a car to call their own,” a feat made even more noteworthy by the fact that the car is available for sale in the US.
Concurrently, the SPAC merger between VinFast and Black Spade Acquisition unfolded alongside the company’s entry into the US automotive market. The past two weeks have been a whirlwind for VinFast’s stock, witnessing its market capitalization surge to nearly $200 billion—a figure surpassing the valuations of industry giants like GM, Ford, and even Volkswagen. However, a closer inspection reveals a nuance—less than 1% of VinFast’s shares are available for trading, with the majority owned by Pham Nhat Vuong and family, rendering them non-tradeable. This limited “float” amplifies the impact of even minor stock trades, culminating in significant price fluctuations. This phenomenon has endeared VinFast to small retail traders, catapulting it into the realm of “meme” stocks, a classification asserted by short-seller Jim Chanos.
VinFast’s present valuation, approximately $100 billion, pales in comparison to established automakers and Japanese giants like Toyota, Nissan, and Honda. In 2022, VinFast’s global car sales amounted to a mere 24,000 vehicles, a fraction of the figures achieved by prominent global auto manufacturers. Additionally, the company’s net loss ballooned to nearly $600 million in the first quarter, with projections indicating a further expansion, as per Bloomberg.
Sam Fiorani, from AutoForecast Solutions, offered insights into the valuation disparity, indicating that this surge is a reflection of short-term investors leveraging the high-profile stock’s market volatility, rather than a demonstration of faith in VinFast’s long-term prospects. He added, “In the long-term, Vinfast will need to showcase a competitive product and a unique market position, which has not been displayed.”
Auto purchasing expert Tom McParland of AutomatchConsulting.com underscored VinFast’s quality challenges and lack of brand recognition compared to established automakers. Moreover, the company confronts the skepticism of consumers who favor vehicles manufactured in Japan, Europe, or the US.
Amid these challenges, VinFast’s manufacturing strategy comes into play. The company revealed plans to construct a $4 billion plant in North Carolina with a production capacity of 150,000 vehicles annually, providing employment for around 7,500 local workers. Geopolitical considerations might favor VinFast, with US government officials potentially desiring the success of strategic partner Vietnam in the American market. Notably, VinFast’s North Carolina facility marks the first instance of an Asian country, apart from Japan and Korea, establishing a factory in the United States.
However, the road ahead remains daunting. Convincing American consumers to embrace a new brand with vehicles priced between $40,000 and $80,000 poses a significant challenge. The inclusion of federal EV tax credits for domestically manufactured cars could potentially bolster VinFast’s prospects, provided it can sustain and augment its sales momentum.
Nonetheless, substantial uncertainties persist. While VinFast acknowledges efforts to rectify earlier vehicle issues through software updates and fixes, achieving profitability remains a formidable journey. Fiorani expressed that despite the allure of electric vehicle sales tax incentives, it will take years for the North Carolina plant’s volume to reach a level where it can generate profitability. He cautioned, “While the jury’s out on the company’s potential success, Vinfast’s chances, under current market and economic conditions, are less than 50/50.”
Source: Yahoo Finance