VinFast’s EV ambitions get a reality check as shares plunge 65%

A 65% slide in VinFast Auto Ltd.’s stock this year underlines the challenge faced by the electric vehicle maker backed by Vietnam’s richest man. It plans to almost triple vehicle delivery this year to 100,000 but had barely hit a 10th of that goal in the first quarter. Meanwhile, it’ll need to raise capital for global expansion, given plans for factories in North Carolina, Indonesia and India.

“VinFast is too ambitious and could continue to face challenges as it expands rapidly overseas," said Bloomberg Intelligence analyst Ken Foong. “They could do well in Vietnam as there isn’t too much competition there, but in the US and other regions, there might be more competition."

The EV maker controlled by Pham Nhat Vuong is trying to break into the global market at a time when Chinese competitors are increasing exports while Tesla Inc. slashed prices last month. The unprofitable company has lost more than 90% of its market value since a spectacular US market debut in August, when the stock had in the span of two weeks soared 700%.

Vuong, who owns almost 98% of the company, has pledged to invest at least another $1 billion of his personal wealth into VinFast. He forecasted that the carmaker would break even or have positive gross profit in 2025, having posted a $618.3 million loss in the first quarter.

So far, it has delivered just 9,689 cars in the first three months of the year after dispatching a total of 34,855 vehicles in 2023. The bulk of its sales have been to related parties of the company.

The firm is targeting sales in as many as 50 markets by the end of 2024, given Vietnam’s limited market. Annual sales of electric vehicles in the Southeast Asian country are estimated at less than 1 million this year, according to HSBC Global Research.

“VinFast may achieve its production target, but won’t achieve sales as they are too weak in their home market," said Jochen Siebert, managing director of JSC Automotive Consulting. “Their home vehicle market isn’t that big and the cars they sell are quite expensive and small for a luxury market."

In a sign of investor scepticism, the stock has dropped from $8.37 a share at the end of last year to $2.89 on Friday.

The carmaker is betting on a $2 billion manufacturing complex in North Carolina — which it expects to complete by the end of 2025 — and planned facilities in Indonesia and India to establish its presence in key markets. That may further burden its balance sheet after the company posted net debt of about $2.9 billion as at the end of March. Cash and cash equivalents were only at $123.3 million.

Some analysts remain bullish on the stock, citing progress in the company’s expanding dealerships and pace of deliveries.

Its Vietnam facility is more than adequate to meet targets for the year, Brian Dobson, a senior research analyst at Chardan Capital Markets LLC, wrote in a report dated April 18. The brokerage kept a buy rating on the stock with a price target of $13.

VinFast may need more funding for their expansion plans, said Bloomberg Intelligence’s Foong. The company’s target of breaking even at the gross profit level in 2025 may be challenging, “given the current run-rate and competition in the sector," he said.