Chances are many Americans have never heard of EV maker VinFast (VFS). But that didn’t keep the company out of the limelight due to sky-high valuations and massive volatility in its share price.
Shares of VinFast are on the move again today, rising 11% in early trade, but slipping again to a nearly 9% loss in midday trade. On Tuesday, the stock plunged a whopping 44%, snapping a six-day winning streak and losing $83 billion in market value in one day. But that’s not the whole story: Vinfant’s shares fell in 2016. It’s up nearly 700% since the company listed on Aug. 15 in a SPAC merger with Black Spade Acquisition.
So, what is VinFast?
VinFast’s story begins in 1993 when entrepreneur Pham Nhat Vung founded VinGroup, a company that operates in the food, entertainment and healthcare sectors in his home country of Vietnam. Soon after, Vingrop entered the bus business, a first for a Vietnamese company.
“Vuong decided to enter the automotive industry through the VinFast subsidiary,” Sam Fiorani, VP of manufacturer information provider AutoForecast Solutions, told Yahoo Finance. “The new venture bought the old General Motors factory and introduced the first with BMW [internal combustion] vehicles”
Vinfast’s GM-based Fadil sub-compact quickly topped the Vietnamese sales charts in 2021, but the company shifted its focus to electric vehicles soon after. Then the company did something unusual not long after launching EVs in the highly competitive US market, starting sales in Q1 this year.
“Vietnam and Vietnam have done in a few years what their neighbors in SE Asia, such as Thailand and Indonesia, have failed to attempt for decades: produce a car to call their own, let alone one to sell in the US,” Michael Dunne, an expert on Asian automobiles and supply chains, told Yahoo Finance.
Coinciding with the sale of the cars in America was SPAC’s merger of VinFast with Black Spade Acquisition. To say that trading in the stock has been volatile in the past two weeks is an understatement.
At one point, Vinfant’s market value swelled to nearly $200 billion, more than the valuations of GM, Ford and even Volkswagen. But when it comes to that assumption, there’s more to it than meets the eye. Less than 1% of VinFast shares are available for trading, the balance is owned by Pham Nhat Vuong and his family and is not available for trading. VinFast shares have a small “float” meaning that relatively small stock transactions can drive price changes for VinFast, which means it has become popular with small retailers and is now a “mem” stock. As short seller Jim Chanos called it this week..
Can Vinfant succeed – and does it justify its valuation?
VinFast, now valued at nearly $100 billion, is a bubble compared to the big automakers listed above, and indeed Japanese behemoths like Toyota, Nissan and Honda.
Vinfant will sell just 24,000 cars globally in 2022, a fraction of the offerings of major global automakers, and Vinfant’s net loss widened to nearly $600 million in the first quarter, according to Bloomberg.
“Rating the company above established automakers is not a sign of confidence in VinFast, but a sign that short-term investors are taking advantage of the high-profile stock in the market,” says AutoForecast Solutions’ Fiorani. “In the long term, VinFast must demonstrate a competitive product and a unique market position, which has not been seen.”
AutomatchConsulting.com car buying expert Tom McParland added that VinFast EVs in Several quality issues And VinFast does not have the brand prestige or recognition of well-known automobiles. In addition, McParland says he has encountered many customers who don’t trust auto products that aren’t made in Japan, Europe or the US.
This could be where VinFast’s manufacturing strategy can come into play. The company last year announced plans to build a $4 billion plant in North Carolina that would have the capacity to produce 150,000 vehicles a year and hire 7,500 local workers.
Geopolitics can also favor Vinfant here. “Like Japan and Korea before him, U.S. government officials may want Vietnam, a strategic partner in Asia, to succeed in America,” Dunn said. Vinfant is the first Asian country after Japan and Korea to start building a factory in the United States (North Carolina).
Regardless, the company still needs to convince Americans to buy the new brand, with vehicles priced at $40,000-$80,000 to boot. If the company can build on sales and gain some momentum, the inclusion of a federal EV tax credit for cars made in North America could help VinFast significantly.
Those are some big “ifs,” however, and while Vinfant says it’s already working to fix the car’s problems with software updates and other fixes, it still has a long way to go to profitability.
“The North Carolina plant will be important as tax incentives for electric vehicle sales emerge. [but] It will take years to grow the local plant to a size sufficient to make it profitable,” Fiorani said. “The jury concluded that Vinfant’s chances of the company’s success were less than 50/50 in the current market and economic conditions.”
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