Vietnam’s EV Champion VinFast (VFS.O) Sells Nasdaq Listing to Value Company at Over $85 Billion
VinFast, the prominent electric vehicle (EV) manufacturer in Vietnam, has successfully captured Wall Street’s attention with a Nasdaq listing that bestows a valuation of over $85 billion upon the startup, despite its ongoing financial losses. This valuation places VinFast at nearly double the worth of established giants like Ford (F.N) and General Motors (GM.N), according to Reuters.
However, the road ahead is challenging as the company aims to accelerate its international growth. VinFast needs to accomplish more than twice its current year-to-date sales over the remaining five months to achieve its ambitious annual target of selling 50,000 EVs, as set by its founder. Achieving this objective necessitates a strategic overhaul, transitioning from solely relying on its own platform for sales to incorporating distributors and dealers—an approach inspired by Tesla (TSLA.O).
In order to effectively compete with industry leaders like Tesla, which has been leveraging its scale and strong profit margins to lower prices and create pressure on rivals, VinFast must also streamline its costs and offer more competitive pricing.
VinFast’s recent Nasdaq debut saw its shares, tied to a special purpose acquisition company (SPAC) merger with Black Spade, experience a surge in value. However, given that the majority (99%) of the company remains under the control of its founder, Pham Nhat Vuong, the limited availability of shares introduces potential volatility to the stock.
Comparisons to other EV SPAC deals, such as Lucid (LCID.O), which formed the basis of VinFast’s initial $23 billion valuation by Black Spade, reveal the uncertainty of such valuations. Lucid’s value has diminished by almost 40%, dropping from a $24 billion SPAC valuation in 2021 to a current valuation of under $15 billion.
VinFast’s plan to raise additional capital also poses a challenge to its lofty valuation. CFO David Mansfield indicated discussions with various investors, including sovereign wealth funds, and projected additional funding within the next 18 months. CEO Le Thi Thu Thuy acknowledged that market dynamics would determine the terms of future investments, emphasizing the reliance on current equity or stock prices.
The Nasdaq listing not only opens avenues for VinFast to potentially offer share-based compensation to retain senior executives—something that has proven difficult in the past—but also sets the stage for the EV maker’s shift to a new “hybrid model” for sales. This model involves collaborating with distributors and dealers for international markets, deviating from its previous reliance solely on proprietary showrooms.
VinFast’s expansion strategy initially hinged on operating its own showrooms, mirroring Tesla’s approach. However, CEO Thuy explained that partnering with external entities accelerates the process, considering the time constraints involved in establishing standalone showrooms.
By June, VinFast had established 122 showrooms across the globe, predominantly concentrated on the U.S. West Coast. Despite these efforts, Founder Vuong’s goal of selling 50,000 EVs this year appears viable, given that the company has already sold over 16,000 units, including domestic sales in Vietnam.
Even if this target is met, VinFast will only be utilizing roughly one-sixth of its Haiphong, Vietnam plant’s production capacity. To expand its operational capacity, the company is constructing a new plant in North Carolina, scheduled to commence operations in 2025.
AlixPartners, a consultancy firm, has stated that EV manufacturers need to achieve annual sales of 400,000 vehicles to achieve profitability, even in the competitive Chinese market. Pricing remains a significant hurdle, and VinFast faces pressure from Tesla’s ongoing efforts to introduce more affordable versions of its vehicles. For instance, Tesla’s Model Y is nearly $7,000 cheaper than VinFast’s VF8, factoring in federal subsidies.
Despite these challenges, VinFast maintains confidence in its product pricing competitiveness. CEO Thuy asserted that the company’s cost base in Vietnam is exceptionally low in comparison to other global automakers, positioning it for cost reductions in the future, the Reuters reported.