Tough journey is just starting for VinFast

May 29, 2023 | 20:00
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VinFast’s move to list in the US demonstrates its determination to position itself as a contender in the rapidly evolving electric vehicle industry. Marc Iyeki, former head of Asia-Pacific Listings at the New York Stock Exchange, gave VIR’s Luu Huong his insight on the ambitious overseas listing.

How would you evaluate VinFast’s valuation upon completion of its merger?

VinFast’s proposed special-purpose acquisition company (SPAC) merger at a $23 billion valuation, negotiated with Black Spade Acquisition, awaits validation in the public market.

Tough journey is just starting for VinFast
Marc Iyeki, former head of Asia-Pacific Listings at the New York Stock Exchange

Although Black Spade Acquisition’s stock price saw a slight rise on the merger announcement, the market’s true sentiment will be revealed upon completion of the merger and the subsequent price reaction.

Further insight will emerge when SPAC shareholders vote on the merger and decide whether they retain (positive sign) or redeem (negative sign) their shares in the new combined entity.

VinFast’s SPAC merger occurs amidst reduced investor enthusiasm for EV companies and the broader market, as well as closer regulatory review of SPAC transactions. This context adds a layer of scrutiny to the deal.

While startups often grapple with mounting losses during their quest for market share, investors will closely monitor VinFast’s year-over-year sales growth, which turned negative from 2021 to 2022 - although 2022 was a difficult year for the auto industry in general. Additionally, attention will be on the trajectory of the company’s widening losses during the same period.

Investors will take some comfort in the significant financial support VinFast has received from parent Vingroup, which will be needed to support the growth strategy. They may also appreciate the potential for the parent to provide support in the areas of public company best practices, technology, and marketing.

VinFast’s valuation is linked to a number of factors, including its ability to sell a new EV model, the VF 8, in the US. This campaign is just beginning.

In comparison to other EV companies that have gone public, how does VinFast’s valuation stack up?

One difference between VinFast and a number of EV counterparts such as Rivian Automotive, Lucid Group, NIO, XPeng and Li Auto that have gone public in recent years, is that VinfFast thus far seems to lack the support of global institutional investors that are based in large EV markets, including BlackRock, Amazon, Ford Motor, Cox Automotive, Alibaba, Tencent, Temasek, Sequoia, and Hillhouse Capital, among others.

These sophisticated investors thoroughly assessed prospects, management, and financials, bolstering credibility and valuations as those companies entered the market.

In late April, VinFast secured a $2.5 billion funding round for future development. However, the pledges stemmed from insider sources, including $1 billion grant from parent company Vingroup Founder and Chairman, Pham Nhat Vuong, and a $500 million grant and $1 billion loan from Vingroup.

While insider backing may not provide the same “stamp of approval” as institutional support, it indicates VinFast’s strong motivation and abundant resources to pursue success in the competitive EV landscape.

Considering the competitive landscape of the EV industry, how confident are you on their profitability plan?

Given the competitive landscape of the EV industry, VinFast’s goal to reach profitability by 2025 is ambitious. The market is extremely competitive as traditional global vehicle manufacturers, with their substantial resources, manufacturing expertise, and familiarity operating globally, increasingly focus on EVs, and go head-to-head with pure EV companies such as Tesla and VinFast.

The competition among EV vehicles and between EVs and traditional ICE (internal combustion engine) vehicles has made achieving profitability a lengthy process: Tesla took about 17 years to become profitable. On the other hand, Li Auto, established 8 years ago, appears to be getting close to annual profitability.

VinFast needs successful, big-splash entries into the key global markets it is now entering – specifically North America and Europe. These markets offer VinFast much greater growth opportunities than does Vietnam alone. At the same time, the company must successfully defend its home turf, and contend with foreign EV companies that are or are planning to sell and manufacture in Vietnam. such as BYD, the world’s second largest EV manufacturer.

On the positive side, VinFast can be expected to benefit from continued strategic support from its deep- pocketed parent, Vingroup, as it strives to become a major player in the global EV market. This support could be in the form of financial backing, branding and marketing expertise, and technology, including AI.

To achieve its target date for profitability, VinFast’s EVs will need to make an excellent first impression in the US, Canada, and Europe. The initial reviews in the US seem to suggest that the jury is still out.

The silver lining is that the company has been handed a list of what needs to be done to have an improved product. Fortunately, the company has the financial resources and seasoned management and board that collectively have relevant industry and international experience and a track record of moving decisively and fast.

Warren Buffett recently said that the auto industry is too tough. Do you think this is true, and how do you assess its accuracy in relation to the EV market and VinFast?

Buffet’s investment philosophy focuses on durable competitive advantages and long-term growth, a strategy that has proven successful for decades. However, he believes the auto industry is a challenging sector for investors due to fierce competition.

While the industry undergoes a shift from internal combustion engine vehicles to EVs, companies like VinFast stand to benefit from significant opportunities. Nevertheless, this disruptive period also brings heightened competition, driven by continuous technological advancements, changing consumer preferences, and lower barriers to entry in the EV market.

VinFast aims to position itself as a global player, but its limited international presence and brand recognition has been noted. How do you view this?

Unlike its global counterparts that developed and refined their products first in home markets, VinFastappears to have chosen a different approach by swiftly going abroad, potentially out of necessity.

VinFast’s decision to accelerate its international presence makes sense, given Vietnam is a relatively small EV test market. As the company aspires to be a global player, an expedited expansion strategy appears justified.

However, as a newcomer from a smaller market, VinFast must prioritise robust branding and marketing efforts to raise its profile. Its upcoming US listing can be helpful in this regard. A successful debut featuring seamless performance, safety, striking design, and competitive pricing is invaluable.

Government policies and the macroeconomic environment play a significant role in the EV industry’s growth. How susceptible is VinFast to potential policy changes in the US?

In one sense, VinFast, due to its limited presence in the US, faces lower susceptibility to potential policy changes compared to established EV players in the country.

However, VinFast considers the US as a crucial global market, making regulatory and policy shifts in emissions standards, trade tariffs, and EV adoption incentives, among other matters, potentially impactful for its expansion strategy.

To succeed in the US, VinFast has likely conducted thorough market research, addressed supply chain concerns, and begun building relationships with key stakeholders and policymakers. Diversification of its product portfolio and geographic footprint is crucial to mitigate reliance on any one market or region.

Notably, has secured $1.2 billion in incentives from North Carolina for its manufacturing plant, which will create jobs, help cultivate a local persona, and potentially help its US-manufactured vehicles qualify for federal EV tax credits. Furthermore, the company worked with California to get its VF 8 model included in the state’s Clean Vehicle Rebate Project, enabling eligibility for rebates.

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VinFast Auto Pte. Ltd. (VinFast), a manufacturer of electric vehicles (EVs) from the Vietnamese conglomerate Vingroup, and Black Spade Acquisition Co. (Black Spade) announced a momentous business merger agreement on May 12.

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Chairman of Vingroup highlights VinFast's path to profitability Chairman of Vingroup highlights VinFast's path to profitability

During Vingroup’s annual shareholders' meeting on May 17, chairman of Vingroup Pham Nhat Vuong provided insights into the company's strategic roadmap and its journey towards profitability.

By Luu Huong

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