Vinfast's meteoric rise: How a startup became world's 3rd most valuable carmaker

Vinfast has barely sold 25,000 units of its electric vehicles worldwide in 2022. Yet, the EV startup has seen its value soar after it made its listing
Le Thi Thu Thuy, vice chairwoman of the Vingroup and VinFast Global CEO, poses by a VF9 electric SUV during the unveiling of a line of electric SUVs at CES 2022 at the Las Vegas Convention Center. (REUTERS)
Le Thi Thu Thuy, vice chairwoman of the Vingroup and VinFast Global CEO, poses by a VF9 electric SUV during the unveiling of a line of electric SUVs at CES 2022 at the Las Vegas Convention Center.

An unprofitable electric vehicle maker has suddenly become the third most valuable auto manufacturer in the world, leaving the likes of General Motors Co and Ford Motor Co in its dust.

Shares of Vietnam’s VinFast Auto have soared almost 700% since it listed in mid-August — even though it hasn’t made many cars yet, let alone turned a profit. Here’s how VinFast suddenly became one of the world’s most valuable carmakers — and how it could come undone again.

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What happened?

On Aug 15, unprofitable Vietnamese EV-maker VinFast, owned by the country’s richest man, made its debut on the Nasdaq Global Select Market index. It is now worth just under $200 billion, more than GM and Ford combined and trailing only Tesla Inc. and Toyota Motor Corp among carmakers.

What caused the share price surge?

The biggest reason: scarcity. Just 1% of VinFast’s shares are available for trading. That means if a buyer snaps up a large enough chunk of those few shares, it can have an outsize effect on the stock’s overall price. It also has landed on the radar of retail traders, a cohort enamoured of EV makers.

Who owns the other 99%

Regulatory filings show Pham Nhat Vuong, Vietnam’s richest man, controls 99% of the company’s outstanding shares, partly via shares held by his wife and the conglomerate Vingroup JSC.

Is VinFast profitable?

No — and that’s not that surprising for such a young company, particularly considering making cars is an extraordinarily capital-intensive business. According to a June regulatory filing, VinFast lost $598.3 million in the three months through March 31, while it generated revenue from vehicle sales of $65.1 million during the same period.

The company said it expects more operating losses in the near term as it scales vehicle production, sets up factories and pays for marketing, sales and servicing efforts.

How many cars has the company actually sold?

Comparatively few. VinFast, which began building a factory in North Carolina in July, forecasts sales will reach 45,000 to 50,000 this year and Vuong predicts the company will break even by the end of 2024 and could be profitable after 2025. To put that figure in context, VinFast’s forecast for units sold this year is less than 1% of the sales General Motors Co achieved in 2022, according to Bloomberg calculations.

Is the share price soaring because the cars are amazing?

That’s probably not it. VinFast itself acknowledges that its VF8 City Edition models have “been the subject of negative press" that could adversely affect its brand, consumer confidence and demand for its vehicles. Some reviews have been scathing — one from May was headlined “Return to Sender," another reviewer said he “drove the VinFast VF8 for the first time and I really wish I didn’t," while cars website Jalopnik said the VF8 had the “worst body control of any modern car I’ve ever driven" as part of a review titled “Critics Agree: The VinFast VF8 Is Very, Very Bad."

VinFast Chief Executive Officer Le Thi Thu Thuy told Bloomberg Television earlier this month that the company takes the negative reviews “very close to our heart, we reflect on the feedback from those reviews and we make our vehicles better."

What does the share price climb mean for Vuong’s fortune?

For now, it’s made him a much richer man — at least on paper. His stake in VinFast was worth $86.7 billion as of Monday’s close in New York. Combined with the remainder of his wealth, which would have put him in the top dozen of the Bloomberg Billionaires Index of the world’s 500 richest people.

However, given VinFast’s volatility, the Bloomberg index for now excludes Vuong’s stake from his net worth. That leaves him with a $5 billion fortune consisting of his shares in Vingroup JSC, the conglomerate he founded, net of cash outlays, dividends and stock transactions.

Is the share price going to crash back down?

While no one knows what will happen to any stock, history suggests that rallies such as VinFast’s can be subject to sudden selloffs. The last time a stock with a tiny free float rose from relative obscurity to the ranks of the world’s largest companies, it didn’t end well. AMTD Digital Inc., another US-listed company with roots in Asia, soared more than 32,000% in the span of a few weeks. AMTD has since tumbled more than 99%, hitting a record low last week. Its valuation now stands at a humble $1.2 billion.

How can I buy VinFast shares?

VinFast shares trade in the US under the ticker VFS.

What are the risks investing in the company?

According to Maybank analyst Tyler Manh Dung Nguyen, VinFast is still a relatively new EV player and it’ll take time and money to build a brand name and ramp up its sales. Challenges facing the company include the global chip shortage, rising inflation and, last but not least, competition from established players in the EV arena, like Tesla, Ford or GM.

First Published Date: 30 Aug 2023, 08:28 AM IST

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