Vietnam is striding into the era of EVs

By Jeff Lee 2022-12-12

The global automotive industry is in the midst of a massive transformation that will prompt reshuffling in three years. Players include traditional automakers and their brand new EV models, cell phone companies, internet service providers, platforms with technical specifications set by Tier 1 system providers (e.g., Hon Hai), and EV start-ups. Vietnam's VinFast is among the top start-ups. In terms of global strategic deployment, VinFast outshines the Chinese NXL trifecta: NIO, XPeng, and Li Auto; in terms of technology resources, VinFast beats Lucid and Rivian in the U.S.; and in terms of government support, VinFast has sheer advantage. I believe VinFast, representative of Vietnam, will be a great inspiration to other developing countries around the world, revealing that the era of EVs offers infinite opportunities as it turns out.

    Vietnam, a country with a population of nearly 100 million, has always been outside the global auto arena, even falling far behind Taiwan in the development of assembly plants and supply chains, but in the past three years, while the EV era has been picking up momentum, VinFast, a Vietnamese EV start-up, has risen. Not only has VinFast recently exported the first batch of homemade EVs to the U.S. market, but the company has also completed the planning of a vehicle assembly plant setup in North Carolina. The plant is expected to be completed and put into production in 2024, and the annual capacity will go up to 600,000 units by year. Moreover, VinFast will raise capital through an IPO on the U.S. stock market next year to expand its auto business in North America. Committed to deployments for the export of finished vehicles and the sale of components, the company set up branches in major auto countries such as China, Germany, Australia, and Korea. It also signed a memorandum of understanding on technical strategic cooperation with CATL (Contemporary Amperex Technology Co. Limited), the world's No. 1 battery manufacturer, at the end of October to cooperate on CTC (cell to chassis) integrated intelligent chassis, using the similar design of Tesla Model Y as an opposing force. Examining the company simply based on the above-mentioned status quo, most people in the auto industry might be under the misapprehension that VinFast is an automaker with many years of experience. In fact, the company was founded only five years ago, and it is the first independent auto brand in Vietnam's history. It is fair to say that back then, VinFast directly entered the EV industry with virtually no technical and operational base, and now five years later, it dares to challenge the global auto market. How did VinFast manage to thrive in such a short period of time and become a shining star in the auto industry? I have a few observations…

  • VinFast's parent company, VinGroup, is the largest private enterprise in Vietnam engaged in real estate business and originally had nothing to do with the auto industry. However, it reached out to a European design company and OEM giant Magna, for the design of its first concept car, and meanwhile, it obtained the ownership and production license of GM's old factory in Hanoi. At this point, the company had gained a world-class technology and production base at an accelerated speed. Later, with the help of German company Siemens, VinFast got in closer touch with the auto parts supply chain in Southeast Asia and officially set foot in the EV sphere.
  • The Vietnamese auto market has seen explosive growth over the past few years, and VinFast has taken this opportunity to rise with gasoline cars (VinFast manufactured gasoline cars at first) touted as the only independent brand.  VinFast jumped to the fourth largest brand in Vietnam last year (behind Hyundai, Toyota, and Kia) and will definitely continue to rise to the top three this year.
  • Despite reporting increasing sales of gasoline cars, VinFast, like most EV start-ups around the world, has suffered heavy losses in the early years. Plus, the construction of charging pile infrastructure in Vietnam is too slow to keep up with the company's expansion timeline. As a result, in addition to developing EV models at full throttle, VinFast followed Tesla's example and started to build its own charging stations throughout the country. The company also announced earlier this year that it would stop selling gasoline cars by the end of the year and go all in on the EV market. This move, just like BYD's decision to stop selling gasoline cars this March, has no way back, leaving VinFast pinning its hopes on the EV models that have not yet been fully validated by the international market.

Of course, given that it is an automaker with annual sales not reaching 100,000 units, VinFast has not yet proven itself to be capable of challenging the global market in terms of profitability, technical solidity, supply chain cost control, assembly quality, etc. (just like other EV start-ups). Nonetheless, from the above three observations, we see that the ability to integrate resources and the burning ambition to make strategic plans at the early stage of the company, the nutrients provided by the rapid growth of the domestic market, and the unfaltering commitment to EV R&D are the sources of confidence that supports VinFast's bold vision of the global market. Whether the outlook for VinFast is rosy or bleak will be axiomatic in its sales results and IPO status in North America next year.